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Analytical procedures of planning the audit
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Analytical procedures are substantive tests of financial information undertaken by the auditor to determine the reasonableness of account relationships. When utilized in the planning phase of the audit, significant relationships and fluctuations identified help determine financial statement items that may require greater investigation or may justify reduction in other substantive tests of details. Analytical procedures include the following:
1.Comparison of financial information for the current year with information for a comparable prior period or periods.
2.Comparison of the financial information with anticipated results (for example, budgets and forecasts).
3. Study the relationships of elements of financial information that would be expected to conform to a predictable pattern based on the entity's experience.
4. Comparison of the financial information with similar information regarding the industry in which the entity operates.
5. Study of relationships of the financial information with relevant nonfinancial information.
Methods used to perform these procedures include basic comparisons, ratio analysis, regression analysis, and time-series analysis. The actual methods selected are based on professional judgment.
To help perform the analytical procedures a computer application is included with your case. Ten ratios are calculated from information in the financial statements and compared to a prior year and industry averages.
During the planning phase of the audit special attention should be placed on the assessment of audit risk and materiality levels to achieve effective and efficient auditing. Note that these judgments will impact overall audit strategy by area, as well as audit programs. The procedures that help the auditor formulate judgments here include understanding of the client's business and industry, preliminary discussions with client personnel, consultations with audit firm specialists, and conducting preliminary analytical procedures.
Early in an engagement, an auditor should make a preliminary assessment of the control environment of the client determine if it contributes to an appropriate atmosphere of control consciousness. In evaluating the control environment, the auditor would consider the client's organizational structure, delegation of authority, use of budgets, and preparation of financial statements. If these control techniques are used, the likelihood that the internal control structure can be relied on by the auditor is increased.
Vocabulary
substantive - самостоятельный, независимый
a reasonableness - приемлемость, умеренность
a fluctuation - колебание, неустойчивость
a ratio - процент
a time-series analysis - анализ временных рядов
likelihood - вероятность
to evaluate - оценивать
relevant - значимый
a predictable pattern - прогнозируемая модель
1. Continue the sentences:
1. Methods used to perform these procedures include.
2. Analytical procedures are substantive tests of financial information undertaken by the auditor to...
3. The auditor would consider the client's organizational structure,.
4. When utilized in the planning phase of the audit,...
5. If these control techniques are used, the likelihood that the internal control structure can be relied.
3.Complete the following table:
| Noun | Adjective |
| reasonableness | |
| substantive | |
| efficient | |
| comparison |
3. Put the necessary words in each of these sentences:
1.The likelihood that... can be relied on by the auditor is increased.
2.Note that these judgments will impact... by area, as well as audit programs.
3.... of the financial information with similar information regarding the industry in which the entity operates.
4. Answer the questions:
1. How many ratios are calculated from information in the financial statements and compared to a prior year and industry averages?
2. What are the methods used to perform analytical procedures?
3. What are the procedures that help the auditor formulate judgments?
5. Connect these words in word combinations:
control results
time-series phase
anticipated techniques
relevant analysis
planning information
Date: 2016-02-19; view: 771; Нарушение авторских прав