level: Analytical Procedures
Questions and Answers List
level questions: Analytical Procedures
| Question | Answer |
|---|---|
| In determining whether and to what extent analytical procedures should be used, what are the four (4) factors that the auditor should consider? | (1) the nature of the assertion (2) the plausibility and predictability of the relationship (3) the availability and reliability of the data used to develop the expectation (4) the precision of the expectation. |
| Define 'Analytical Procedures'. | (AU-C 520.04): “Evaluations of financial information through analysis of plausible relationships among both financial and nonfinancial data. **Analytical procedures also encompass such investigation, as is necessary, of identified fluctuations or relationships that are inconsistent with other relevant information or that differ from expected values by a significant amount.” Accordingly, analytical procedures would be useful in identifying unusual year-end transactions. |
| When is Analytic Procedures required for an audit? | 1. Planning stage 2. Final review stage *Optional at the substantive testing stage* |