Analytical Procedures

Question 1

Define “analytical procedures.”

Answer 1

Evaluations of financial information through analysis of plausible relationships among both financial and nonfinancial data

Question 2

What three purposes might analytical procedures serve?

Answer 2

1. )Required during planning
2. )May be used as substantive evidence (not required)
3. )Required during final review

Question 3

What matters must be documented in connection with analytical procedures?

Answer 3

1. )The auditor’s expectation and the factors considered in developing it
2. )The results of the comparison of the recorded amounts (or ratios) with the expectations
3. )Any additional auditing procedures performed to investigate significant differences identified by that comparison

Question 4

List the four factors that affect the efficiency and effectiveness of analytical procedures for substantive purposes.

Answer 4

1. )Nature of assertion
2. )Plausibility and predictability of relationship
3. )Availability and reliability of data
4. )Precision of expectation

Question 5

What is the purpose of analytical procedures in the overall review?

Answer 5

To verify the conclusions reached in the audit

Question 6

What is the purpose of analytical procedures in audit planning?

Answer 6

To aid in understanding client activities and in targeting risky areas where material misstatements are more likely to occur.