7-34 (Objectives 7-4, 7-5) Analytical procedures are an important part of the audit process and consist of the evaluation of financial information by the study of plausible relationships among financial and nonfinancial data. Analytical procedures may be done during planning, as a substantive test, or as a part of the overall review of an audit. The following are various statements regarding the use of analytical procedures: Should focus on enhancing the auditors understanding of the clients business and the transactions and events that have occurred since the last audit date Should focus on identifying areas that may represent specific risks relevant to the audit Require documentation in the working papers of the auditors expectation of the ratio or account balance Generally use data aggregated at a lower level than the other stages Should include reading the financial statements and notes to consider the adequacy of evidence gathered Not required during this stage Involve reconciliation of confirmation replies with recorded book amounts Use the preliminary or unadjusted working trial balance as a source of data Do not result in detection of misstatements Designed to obtain evidential matter about particular assertions related to account balances or classes of transactions Required

For each of the 10 statements listed above, select the stage of the audit for which the statement is most accurate using the following responses: Planning the audit Substantive testing Overall review Statement is not correct concerning analytical procedures.* *Based on AICPA question paper, American Institute of Certified Public Accountants. [Return to reference]