Question: AU Section 316 indicates that the auditor should consider the results of analytical procedures performed in planning the audit that indicate possible implausible or unexpected

AU Section 316 indicates that the auditor should consider the results of analytical procedures performed in planning the audit that indicate possible implausible or unexpected relationships in assessing the risk of firaud. For example, if the auditor compares revenue reported by product line each month (i.e., monthly sales volume) with sales (or production) capacity, and determines that the number of items reported as sold exceeds capacity, then the auditor should be concerned that revenue may be materially overstated due to fraudulent revenue transactions. What other types of unexpected relationships, ratios, or trends might suggest an increased risk of fraud? Discuss any relationships, ratios, or trends you identified in this assignment that might represent an increased fraud risk.

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In auditing analytical procedures involve evaluating financial information through analysis of plausible relationships among both financial and nonfinancial data The purpose is to identify potential d... View full answer

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