8Aud - Planning Activities - Analytical Procedures

Front 1

What AU and SAS No correspond to Analytical Procedures?

Back 1

AU329, SAS 56

Front 2

What is the title for AU329, SAS 56?

Back 2

Analytical Procedures

Front 3

What is the definition of Analytical Procedures?

Back 3

Analytical Procedures : evaluations of financial information made by a study of plausible relationships among both financial and non-financial data (sometimes referred to as "tests of reasonableness")

Front 4

What is a short defintion of Analytical Procedures?

Back 4

Evalutations!

Front 5

What are the three purposes of Analytical Procedures?

Back 5

1. Required during planning
2. Constitutes a form of substantive evidence
3. Required during review

Front 6

In general, what do Analytical Procedures provide in the Planning of an audit?

Back 6

They direct attention!

Front 7

Specifically, what do Analytical Procedures provide in the Planning of an audit?

Back 7

1. Helps auditor understand the client's activities.
2. Helps target risky areas where misstatements may be more likely.
3. Primarily based on financial data, but may use non-financial data, too (e.g., sales per square foot is a widely used benchmark in the retail industry).

Front 8

The effectiveness and efficiency of analytical procedures for substantive purposes depends on what 4 factors?

Back 8

1. The Nature of Assertion
2. Plausibility and Predictability of relationship
3. Availability and reliability of data
4. Precision of expectation

Front 9

Sometimes the nature of the assertion determines whether an analytical procedure is effective or not. Give an example of this.

Back 9

Can be effective in testing for OMISSIONS of transactions that would be hard to detect with procedures that focus on recorded amounts.

Front 10

Give 3 examples where the Plausibility and Predictability of relationship causes or does not cause an analytical procedure to be effective.

Back 10

a. Relationships in a stable environment are usually more predictable than those in a dynamic environment.

b. Relationships involving income statement accounts tend to be more predictable than those involving balance sheet accounts (since the income statement deals with a period of time rather than a single moment in time).

c. Relationships involving transactions subject to management discretion tend to be less predictable.

Front 11

The Availability and Reliability of data effect the effectiveness of analytical procedures in what 3 ways?

Back 11

The reliability increases when the data used is:

(1) Obtained from independent external sources

(2) When it is subject to audit testing (either currently or in the past)

(3) When it is developed under conditions of effective internal control.

Front 12

How does Precision of Expectation provide effectiveness for analytical procedures?

Back 12

The likelihood of detecting a misstatement decreases as the level of aggregation of the data increases.

Front 13

What do Analytical Procedures provdide during the final review of an audit?

Back 13

A final opportunity to verify the appropriateness of conclusions reached before the auditor's report is issued.