1.Develop audit procedures for the use of analytical procedures in the planning
ID: 355213 • Letter: 1
Question
1.Develop audit procedures for the use of analytical procedures in the planning phase to identify significant changes in operating and financial activities of the firm over previous years
2. Develop audit procedures for the use of analytical procedures in the completion phase to identify significant relationships in operating and financial activities of the firm to ascertain if there is consistency and that sufficient evidence has been gathered to explain changes in relationships when compared to previous years.
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Explanation / Answer
Answer 1-
At the planning stage analytical procedures helps to identify the timeline and type of auditing procedures that will help in determining significant changes in operating and financial activities of the firm over previous years. Audit procedure for the use of analytical procedures that can be developed include following steps –
“Audit procedure involves various steps like inspection, observation, confirmation, recalculation, and analytical procedures which further involves following steps-
Indentifying risk areas - Firstly there is need to indentify the high and low risk areas so that on the basis of that auditing can be done.
Reviewing changes in accounts– Comparing the accounts balances with preious years to know what policies needs to be changed.
Substantive testing - It helps to know that if company accounts are undervalued or overvalued and what needs to be adopted for improving it.
Answer 2 -
Audit procedures for the use of analytical procedures in the completion phase helps to give an opinion about the company reports. It involves following steps-
Checking the adequacy of evidences - Auditors check the adequacy of the facts and proofs given for any undervalued or overvalued figures identifies in planning stage or during the audit.
Additional requirements – If any further discrepancy is identified then new evidences supporting them are obtained by auditors.
Audit conclusion – After auditing all the accounts, an overall opinion is given by them about the financial statement of the company and what needs to be changed as compared to the previous years.
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