The extent of reliance that the auditor places on the results of analytical procedures depend on the materiality of the items involved, other audit procedures performed by the auditor, the accuracy with which expected results can be predicted and the assessments of inherent and control risks.

Required:

A. Give two examples of circumstances in which the auditor can rely on analytical procedures and two circumstances when reliance on analytical procedures would not be advisable.

B. Explain the relationship between company controls and reliance on analytical procedures.