Explanation Analytical Procedure: Analytical procedure is a method by which standard balances are compared with actual balances. The standards are developed at the time of planning the audit and compared at the time of review of the audit. The five steps involved with the use of preliminary analytical procedure are: Expectation development: This is the first and foremost step. It involves developing an expectation and anticipating balances based on evaluating relationships, prior year balances, appropriate information like inventory, production. Define major difference: A maximum acceptable difference called threshold should be defined. It should be done before computing any difference to avoid bias and prevent an auditor from justifying the variance...

6th Edition

ISBN: 9780077862343

Author: LOUWERS, Timothy J.

Publisher: Mcgraw-hill Education,

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Chapter 4, Problem 15RC

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State the five steps involved with the use of preliminary analytical procedures.

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Harry Styles Supplies has a balanced day of 31December. On 1 January 2XX5, it had an opening inventory balance of $32,500. Harry Styles Supplies purchased $48,700 worth of goods for resale. On 31 December 2XX5, the closing inventory balance was $19,800. During the year, Harry Styles Supplies had sales of $68,000. What is the Cost of Goods Sold for Harry Styles Supplies for the period ending 31 December 2XX5?

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