Which of the following is most correct with respect to the use of analytical procedures? * Analytical procedures may be used in evaluating balances in the testing O phase as long as the auditor also uses them in assessing the going concern assumption. Analytical procedures must be used throughout the audit. Analytical procedures are performed by studying plausible relationships between financial and nonfinancial data. Analytical procedures used in the testing phase of the audit are primarily used to direct an auditor's attention so that the auditor's understanding of the business is improved.

Which of the following is most correct with respect to the use of analytical procedures? * Analytical procedures may be used in evaluating balances in the testing O phase as long as the auditor also uses them in assessing the going concern assumption. Analytical procedures must be used throughout the audit. Analytical procedures are performed by studying plausible relationships between financial and nonfinancial data. Analytical procedures used in the testing phase of the audit are primarily used to direct an auditor's attention so that the auditor's understanding of the business is improved.

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter7: Planning The Audit: Identifying, Assessing, And Responding To The Risk Of Material Misstatement

Section: Chapter Questions

Problem 3RQSC

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Analytical procedures consist of evaluations of financial informationmade by a study of plausible relationships among both financial and nonfinancial data.They range from simple comparisons to the use of complex models involving manyrelationships and elements of data. They involve comparisons of recorded amounts, orratios developed from recorded amounts, to expectations developed by the auditors.a. Describe the broad purposes of analytical procedures.b. When are analytical procedures required during an audit? Explain why auditors useanalytical procedures extensively in all parts of the audit.c. Describe the factors that influence the extent to which an auditor will use the resultsof analytical procedures to reduce detailed tests in meeting audit objectives.*
Which of the following is not the factor to be considered by an auditor while performing analytical procedures? O a. Develop expectation of recorded amounts or ratios and evaluate whether the expectation is sufficiently precise to identify misstatement O b. Evaluate reliability of data O c Determine suitability of overall audit strategy O d. Determine suitability of particular substantive analytical procedure for given assertion
Why is it desirable to design tests of details of balances beforeperforming tests of controls and substantive tests of transactions? State the assumptionsthat the auditor must make in doing so. What does the auditor do if the assumptions arewrong?
Which one below is not an example of auditors'substantive testing? Select one: a. Controls testing. b. Tests of transactions. c. Tests of balances. d. Substantive analytical procedures.
Which of the following statements is correct concerning analytical procedures used in planning an audit engagement?a. They often replace the tests of controls that are performed to assess control risk.b. They typically use financial and nonfinancial data aggregated at a high level.c. They usually involve the comparison of assertions developed by management to ratios calculated by an auditor.d. They are often used to develop an auditor’s preliminary judgment about materiality.
Generally, which of the following audit procedures is the least expensive to perform? A. Analytical procedures B. Tests of details of balance C. Substantive tests of transactions D. Tests of controls E. Risk assessment procedure
What are the objectives of an audit risk assessment? Explain why a risk assessment performed during audit planning sets the tone for the entire audit engagement. Also comment on how the concept of ‘risk assessment’ might be useful for any accountant at the outset of any assignment, including non-audit work.
Define risk of material misstatement. At what level of the financial statements do auditors measure RMM? Describe how auditors assess the RMM. What role does RMM play in substantive testing?
You have been asked by the audit manager to undertake preliminary analytical procedures.a) Identify the sources of information from which an auditor develops expectations.b) Describe the factors that influence an auditor’s consideration of the reliability of data for purposes of achieving audit objectives.
1. Please explain how to Evaluate the Data Reliability When Developing Expectations. The data an auditor will use to develop expectations in the acquisition and payment cycle has been deemed reliable by the audit staff. 2. Please Discuss the likely factors the audit team will consider when making this determination.
The auditor should consider audit risk when planning and performing an audit of financial statements. Audit risk should also be considered together in determining the nature, timing, and extent of auditing procedures and in evaluating the results of those procedures. Required: a. Define audit risk. b. Describe the components of audit risk (e.g., inherent risk, control risk, and detection risk). c. Explain how these components are interrelated. (AICPA, adapted)
The auditor's assessment of the reliability and sufficiency of the information contained in the underlying accounting records is a part of ______________ a. Audit Test b. Comparison c. Evaluation d. Judgement