In determining the level of materiality for an audit, what should not be considered?
- A) Prior year’s errors
- B) The auditor’s remuneration
- C) Adjusted interim financial statements
- D) Prior year’s financial statements
Analytical procedures issued in the planning stage of an audit, generally
- A) helps to determine the nature, timing and extent of other audit procedures
- B) directs attention to potential risk areas
- C) indicates important aspects of business
- D) All of the above
Which of the following statements is most closely associated with analytical procedure applied at substantive stage?
- A) It helps to study relationship among balance sheet accounts
- B) It helps to discover material misstatements in the financial statements
- C) It helps to identify possible oversights
- D) It helps to accumulate evidence supporting the validity of a specific account balance
The basic assumption underlying the use of analytical procedures is :
- A) It helps the auditor to study relationship among elements of financial information
- B) Relationship among data exist and continue in the absence of known condition to the contrary
- C) Analytical procedures will not be able to detect unusual relationships
- D) None of the above.
What are analytical procedures?
- A) Substantive tests designed to assess control risk
- B) Substantive tests designed to evaluate the validity of management’s representation letter
- C) Substantive tests designed to study relationships between financial and nonfinancial
- D) All of the above
Which of the following is not an analytical procedure?
- A) Tracing of purchases recurred in the purchase book to purchase invoices.
- B) Comparing aggregate wages paid to number of employees
- C) Comparing the actual costs with standard costs
- D) All of them are analytical procedure
When applying analytical procedures, an auditor could develop independent estimate of an account balance to compare it to
- A) client’s unedited account balance
- B) client’s unedited account balance adjusted for trends in the industry
- C) Prior year audited balance
- D) Prior year audited balance adjusted for trends in the industry
What is the primary objective of analytical procedures used in the overall review stage of an audit?
- A) To help to corroborate the conclusions drawn from individual components of financial statements
- B) To reduce specific detection risk
- C) To direct attention to potential risk areas
- D) To satisfy doubts when questions arise about a client’s ability to continue