D) collusion and materiality. Analytical procedures can help make your audit less time-consuming and more effective at detecting errors and omissions. Perform internal control testing and planning to support an audit opinion, including: preparing supporting work paper documentation, conducting analytical reviews of account balances and preparing financial statements. Which of the following is There are many methods by which auditors can apply these procedures, as stated above.if(typeof ez_ad_units != 'undefined'){ez_ad_units.push([[320,100],'harbourfronts_com-medrectangle-1','ezslot_3',103,'0','0'])};__ez_fad_position('div-gpt-ad-harbourfronts_com-medrectangle-1-0');report this ad, What's your question? Simplify loan management to boost income, lower risk. D) classes of transactions tests are the most efficient manner to compensate for inherent risk. B) does not aid in the preparation of the tax return since accounting and tax rules differ. Auditing and Assurance Services, 15e (Arens) Chapter 8 Audit Planning and Analytical Procedures Learning Objective 8-1 1) A measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued is the: A) inherent risk. Analytical procedures performed during phase III of the audit. processing. $\$ 400$ is for work in} & \text{ } & \text{ } & \text{ }\\ The chain recently launched a campaign to increase market share by building new inns. If the difference is less than the threshold, the auditor generally accepts the recorded amount without further investigation and the analytical procedure is complete. .04 Analytical procedures are used as a substantive test to obtain evidential matter about particular assertions related to account balances or classes of transactions. D) SEC. Jul 2012 - May 20141 year 11 months. ISA 520 requires that analytical procedures should be applied as risk assessment procedures at the planning stage. On top of that, they also help auditors analyze and test the acquired information. Cut-off analysis The cut-off analysis includes pausing operations such as receiving and shipping of inventory while making a physical count to avoid mistakes. Monitor Ref: 16.232. C) account balances are less important to the auditor then the changes in the account balances. \text{(d) Pay $\$ 600$ to workers. The American Institute of Certified Public Accountants (AICPA) publishes guidance on using analytics during a financial statement audit. In addition, global initiatives to harmonize regulation of in vitro diagnostics (IVDs) and other medical devices have resulted in changed regulatory requirements at national, regional, and global levels, which may be difficult to interpret.WHO provides specialized . Audit Strategy: Meaning, Example, Sample, Plan, Stay up-to-date with the latest news - click here. Trend analysis and ratios analysis are the two most commonly used analytical procedures in the audit. 4) Audit documentation of the evidence gathered by the auditor should meet which of the following criteria? (b)Provide$3,200ofconsultingservicestoalocalbusiness. As mentioned above, auditors use these procedures during the risk assessment process. A) management may establish appropriate policies and procedures but not act on them. not Analytical procedures can also be applied during the actual audit engagement when the auditor is performing substantive tests of details to company financial statements, however, this is not required. A. Analytical procedures do not involve comparisons of recorded amounts to expected amounts. If the auditor has determined that there is an unusual relationship from the analytical procedure test, it might increase the likelihood that there are risks of material misstatements involved in the financial statements. Auditing and Assurance Concepts and Applications (Darell Joe O. Asuncion, Mark Alyson B. Ngina, Raymund Francis A. Escala) The Law on Obligations and Contracts (Hector S. De Leon; Hector M. Jr De Leon) Unit Operations of Chemical Engineering (Warren L. McCabe; Julian C. Smith; Peter Harriott) Principios de Anatomia E Fisiologia (12a. 20) External financial statement auditors must obtain evidence regarding what attributes of an system? C) yes no and maintaining an adequate internal control structure and procedures for financial reporting 2) Audit documents Evaluate the likelihood of material misstatement. What are the types of Analytical Procedures? A) authorization, execution, and payment. A) are kept by the client for easy reference for their accounting staff. \text{newspaper in May.} Analytical Procedures. achieves its objectives and goals. La Quinta Motor Inns is a moderately priced chain of motor inns located across the United States. Examination. They are optionally used as a substantive procedure during the course of an audit. For example, accountants develop expected values regarding various financial ratios, based on the accountants understanding of the company and industry trends, as well as the accountants understanding of potential areas of increased risk of misstatement. D) both A and B, because they vary from client to client. C) is another term for the audit program. Analytical procedures that are used during the planning phase of an audit will enhance the auditors understanding of the clients operation as well as flag potential risks of material misstatements. Similarly, auditors can use it to build expectations for specific amounts and check them against the actual figures. Also, by comparing account balances to industry data, auditors can be alerted to any significant difference that could lead to the companys issue. D) no yes yes, 10) Which of the following is a risk assessment principle? Role Summary -. balances. Save my name, email, and website in this browser for the next time I comment. 11) In performing the audit of internal control over financial reporting, the auditor emphasizes Translate PDF. Read the press release. A) risk assessment policy Consider the following set of transactions occurring during the month of May for Bison Consulting Company. 22) The ________ is helpful in preventing classification errors if it accurately describes which reference. A) all frauds will be detected. B) maintaining insurance for fire and theft It is important that auditors understand how to maximize effectiveness and efficiency in this required audit procedure. control? B) to evaluate the effectiveness of the company's internal controls over all relevant assertions in Provide a base for assessing the risks of material misstatements. responsibility for an asset. the financial statements. Source: SAS No. No matter the challenge, we help you face it head on. One of these techniques includes analytical procedures. an example of achieves its objectives and goals. accounting records would be referred to as C) avoid duplicating the work performed by the internal audit staff. Suitability of Particular Analytical Procedures for Given Assertions (Ref: Para. So, like a good sleuth, you are surveying the accounting landscape to see if material misstatements exist. D) Audit evidence as displayed in the workpapers is primarily performed to protect the auditing The consent submitted will only be used for data processing originating from this website. Impacton:(a)Receive$1,500fromcustomerswhowerebilledforservicesinApril. B) use relevant, quality information to support the functioning of internal controls Analytical procedures are used as substantive procedures when the auditor considers that the use of analytical procedures can be more effective or efficient than tests of details in reducing the risk of material misstatements at the assertion level to an acceptably low level. Use the contact us button here, or the link in the top navigation, to reach product support for your MST products. firm in the case of a lawsuit by investors. controls. Analytical procedures involve the following process: Review of the relationship between one financial data and another: Here the auditor matches financial data obtained from different sources in . Similarly, auditors can use it to build expectations for specific amounts and check them against the actual figures. For example, if a manufacturers gross margin seems off, the accounting department might explain that its supplier increased the price of raw materials. D) the implementation and operating effectiveness of the controls. 3. B . B) no no none of the above. In addition, now that you understand the role analytical procedures play in an audit, you can anticipate audit inquiries, prepare explanations, and compile supporting documents before the start of audit fieldwork. organized to benefit the client's staff School Ateneo de Manila University; Course Title MANAGEMENT 8; Uploaded By CorporalCamel539. B) a material weakness. But so-called analytics isnt a novel concept for auditors. Analogy for Incorrect Acceptance and Incorrect Rejection. Analytical procedures consist of the evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial information. A) collusion. B) the frequency and effectiveness of the controls. A) benchmark to compare the company's results. 5) What type of supporting schedule is designed to show detailed tests performed, does A) yes yes 12) Internal controls can never be regarded as completely effective. C) the Chief Accounting Officer. A) a copy of the current and prior years' audit programs. For example, if the company has much longer payables days comparing to industry data, it may indicate that the company is having liquidity or cash flow problems. D) all of the above. C) COSO The auditor must understand the company's . CONCEPT REVIEW: While analytical procedures are This problem has been solved! Harbourfront Technologies. An audit procedure is a technique for collecting and analysing data to provide evidence. D) companies must use the COSO framework to establish internal controls. These may include various tools such as forecasts and budgets. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); John recently retired after working as a director of finance for a multinational manufacturing company. not A) adequacy of the computer system. The Senior Audit Manager is expected to recruit, hire, and develop assigned staff . C) The most important type of protective measure for safeguarding assets and records is the use Management A) organizational structure not B) no no Finally, as a measure of the physical qualities of the location La Quinta chose the distance to the downtown core. 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