An auditor completes a trend analysis to compare net income from the past three years, looking for anomalies or areas of focus for the audit. This process is known as a/an: A Analytical procedure CAAT Observation. Flow Chart
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- A study investigated the relationship between audit delay (the length of time from a companys fiscal year-end to the date of the auditors report) and variables that describe the client and the auditor. Some of the independent variables that were included in this study follow: A sample of 40 companies provided the following data: a. Develop the estimated regression equation using all of the independent variables included in the data. b. Test for an overall regression relationship at the 0.05 level of significance. Is there a significant regression relationship? c. How much of the variation in the sample values of delay does this estimated regression equation explain? What other independent variables could you include in this regression model to improve the fit? d. Test the relationship between each independent variable and the dependent variable at the 0.05 level of significance, and interpret the relationship between each of the independent variables and the dependent variable. e. On the basis of your observations about the relationships between the dependent variable Delay and the independent variables Quality and Finished, suggest an alternative regression equation to the model developed in part a to explain as much of the variability in Delay as possible.1. Using the information above, complete the calculation of accounting ratios andpercentages and comment briefly on the performance of the company for the twoyears. 2. By reference to requirement 1, identify the areas that are subject to increased auditrisk and describe the further audit work you would perform in response to those risks.Spreadsheet software would be most useful for which of the following audit activities?a. Testing internal controls over computerized accounting applications.b. Preparing an audit plan.c. Preparing a comparison of current-year expenses with those from the previous year.d. Drafting a planning memorandum.
- The practice of auditing firms to spread work throughout the year by carrying out as many auditing procedures as practicable before the balance sheet date, in order to minimize the load during the peak period. This is called a. Test of recorded transactions b. Confirmation of receivable and payablesc. Observation and test-check of inventoriesd. Interim workThe auditors use an analytical procedures during the course of an audit. The most important phase of performing these procedures is the: Vouching of all data supporting various rates, Investigation of significant variations and unusual relationships, Comparison of client-computed statistics with industry data on a quarterly and full-year basisWhich of the following BEST (select one) describes why auditing can be viewed as a continuous cyclical process? a) The audit plan is used to develop the audit schedule. b) Many audit departments review the same areas each year as part of the audit plan. c) Historical and current information from audits should be incorporated into the risk assessment. d) Businesses go through economic cycles, so audit plans must go through cycles.
- Large audits are usually split into two phases. Close to the end of the year interim audits consisting of transaction testing and system assessment work are carried out. The final audit takes place after the year end and this involves testing of items of statement of financial position and the balance of the work. Required: (a). Identify FOUR key benefits that may arise as a result of spreading the audit work across interim audit and final audit. (b). Explain FOUR audit procedures required to be carried out during final audit and audit procedures carried out during Interim Audit. (c). According to ISA 300, certain procedures must only be performed at or after a year end. Identify TWO of these procedures.Auditors often use the ________ to determine the estimated population exception rate. current year's audit results tolerable exception rate preceeding year's audit results estimated computed by managementAs part of your annual audit plan, you will be conducting an audit of the Purchases-Payables cycle. And to effectively plan for the audit, you have to document your understanding of the said process using a flowchart. This is also part of your usual planning procedures which will be expected from you by your Audit Manager. As a result of your interviews, observations, understanding of the process’ policies and procedures; you were able to gather the following data: The requests to purchase materials or the Purchase Requisition (PR) are prepared by the Purchasing department which is confirmed by the inventory controllers. These are approved by authorized personnel based on the company’s Approval Matrix. After confirmation of the PR, Purchasing Department will prepare the Purchase Orders (PO). These POs do not undergo further approval as long as supported by approved by PRs. A copy of the PO is sent to the vendor and another copy of the same PO to the Receiving personnel. Another copy…
- As part of your annual audit plan, you will be conducting an audit of the Purchases-Payables cycle. And to effectively plan for the audit, you have to document your understanding of the said process using a flowchart. This is also part of your usual planning procedures which will be expected from you by your Audit Manager. As a result of your interviews, observations, understanding of the process’ policies and procedures; you were able to gather the following data: The requests to purchase materials or the Purchase Requisition (PR) are prepared by the Purchasing department which is confirmed by the inventory controllers. These are approved by authorized personnel based on the company’s Approval Matrix. After confirmation of the PR, Purchasing Department will prepare the Purchase Orders (PO). These POs do not undergo further approval as long as supported by approved by PRs. A copy of the PO is sent to the vendor and another copy of the same PO to the Receiving personnel. Another copy…Which of the following procedures would an auditor most likely perform to obtain evidence about the occurrence of subsequent events? A. confirming a sample of material accounts receiveable established after year-end. B. Comparing the financial statements being reported on with those of the prior period. C. Investigating personnel changes in the accounting department occurring after year-end. D. Inquiring as to whether any unusual adjustments were made after year-end.As a result of analytical procedures an auditor determines that gross profit has declined from 30% to 15% in the current year. The auditor should.. A. Document manamgent intentions with respect to reversing the trend. B. Evaluate managment's performance in causing the deline C. Require a footnote disclosure D. Consider the possibility of an error in the financial statements.
