Analytical Procedures

Question 1

Analytical Procedures

Answer 1

Professional standards indicate that analytical procedures are most effective when they are applied to plausible and predictable relationships, often involving income statement accounts.

Question 2

Analytical Procedures

Answer 2

Analytical procedures involve an assumption of the existence of a plausible relationship among financial and nonfinancial information

Question 3

Analytical Procedures

Answer 3

• Analytical procedures are not statistical tests.
• Analytical procedures assume that plausible relationships among data may reasonably be expected to exist and continue in the absence of known conditions to the contrary. For this reason, data can be used to predict future balances against which recorded balances may be compared.
• They involve the comparison of recorded amounts, or ratios developed from recorded amounts, to expectations developed by the auditor.
• Unusual fluctuations or differences are then investigated as they may lead to the discovery of material errors in the financial statements.