Question
7-34 ( Objectives 7-4 , 7-5 ) Analytical procedures are an important part of the audit process and consist of the evaluation of financial information
7-34 (Objectives 7-4, 7-5) Analytical procedures are an important part of the audit process and consist of the evaluation of financial information by the study of plausible relationships among financial and nonfinancial data. Analytical procedures may be done during planning, as a substantive test, or as a part of the overall review of an audit.
The following are various statements regarding the use of analytical procedures:
Should focus on enhancing the auditors understanding of the clients business and the transactions and events that have occurred since the last audit date
Should focus on identifying areas that may represent specific risks relevant to the audit
Require documentation in the working papers of the auditors expectation of the ratio or account balance
Generally use data aggregated at a lower level than the other stages
Should include reading the financial statements and notes to consider the adequacy of evidence gathered
Not required during this stage
Involve reconciliation of confirmation replies with recorded book amounts
Use the preliminary or unadjusted working trial balance as a source of data
Do not result in detection of misstatements
Designed to obtain evidential matter about particular assertions related to account balances or classes of transactions
Required
For each of the 10 statements listed above, select the stage of the audit for which the statement is most accurate using the following responses:
Planning the audit
Substantive testing
Overall review
Statement is not correct concerning analytical procedures.*
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