In an effort to develop a more precise (i.e., higher quality) expectation, you asked an associate to collect more detailed information, which is provided below. The quarterly rates are comparable to those reported in a Washington State Bank Commission publication. The quarterly loan volumes have been tied to audit work in other areas of the audit file. You decided not to have the associate track down detailed information for the "Individual and Other Loans" category because it is relatively small and is made up of heterogeneous loans. However, for the loans in the Individual and Other Loans category you do have the loan volume and weighted average interest rate as of December 31, 2007 and December 31, 2008. Recall that materiality for this area is \(\$ 525,000\).......

Discussion Questions:

[1] Given the additional information provided in Part B (i.e., quarterly information by loan type), please determine if Northwest Bank's interest income from loans reported at December 31, 2008 appears fairly stated. Can you accept 2008 interest income as reported?

[2] Based on the results of the analytical procedure preformed in Part B, how likely do you think it is that 2008 interest income is materially misstated?

[3] Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure:

[4] Now reevaluate the first analytical procedure you performed (i.e., based only on average aggregate loan and interest averages). Using hindsight, please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by that high-level interest income analytical procedure:

Transcribed Image Text:

Yes No Please briefly explain your answer.