Question: Audit evidence needs to be evaluated and validated before it can be relied upon by an independent auditor One of the tools employed by an

Audit evidence needs to be evaluated and validated before it can be relied upon by an independent auditor One of the tools employed by an auditor is ratio analysis in carrying out an audit assignment. This includes re-computation of various accounting ratios which is then compared with prior years and industry averages. Discuss the sufficiency, appropriateness and limitation of ratio analysis as audit evidence

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Sufficiency Pros Quick Overview Ratio analysis provides a quick overview of a companys financial performance and position aiding auditors in identifyi... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...

Research various global financial services organizations (for example, UBS AG, E-Trade, Schwab, ING, Bank of America, HSBC, RBS) through their company websites and other publicly available...

The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...

Audit evidence needs to be evaluated and validated before it can be relied upon by an independent auditor Required: a . An auditor makes enquiries from clients, Directors and employees during an...

Audit evidence needs to be evaluated and validated before it can be relied upon by an independent auditor One of the tools employed by an auditor is ratio analysis in carrying out an audit...

Audit evidence needs to be evaluated and validated before it can be relied upon by an independent auditor Required: a. i. ii. b. c. An auditor makes enquiries from clients, Directors and employees...

Accounting Research Center, Booth School of Business, University of Chicago Why Do Audits Fail? Evidence from Lincoln Savings and Loan Author(s): Merle Erickson, Brian W. Mayhew, William L. Felix,...

Read the examples provided for the audit of estimates and explain which phase of the audit process each example relates to. Explain why the CPAB recommended that the auditors needed to apply a...

Does anyone know where this article come from? I wanna cite it as a resource!! Thanks! 41 Auditing Insurance Companies 41.1 OVERVIEW OF THE INDUSTRY (a) Structure of the Industry, (b) Reinsurance,...

Identify whether a debit or credit would be made To decrease prepaid insurance

You have invested in a diamond mine in Nigeria. The mine is expected to generate nominal, after-tax cash flows of 1 million per year in perpetuity at a risk-adjusted discount rate of 12.5 percent per...

13 In a drugs trial, two different drugs are tested on some patients. 145 patients are given drug A, and it helps 112 of them. 180 patients are given drug B, and it helps 137 of them. Use a...

Jane Doe is a private company which a management accountant is analyzing its performance. So it is trying to look at different components that are distributing to its success. The tests he wants to...

V (L) T(K) Volume Volume Temperature (C) Temperature (K) (mL) (L) 273 K 22.5 0.0225 L 8.24x10^-5 10 283 K 23 0.023 L 8.12x10^-5 20 293 K 23.8 0.0238 L 8.12x10^-5 30 303 K 25 0.025 L 8.25x10^-5 40 313...

Explain briefly two ways in which the details of account balances may be tested; and (a) Describe briefly how the following audit procedures are performed (b) Using a specific example to illustrate...

Assume that the equity method Equity Investment account relating to a subsidiary has a reported balance of $6,250,000, including a carrying value of goodwill of $619,000. You currently value that...

Select a Fortune 500 Company from one of the following industries: Pharmaceutical Energy Retail Automotive Computer Hardware Review the balance sheet and income statement in the company's 2015 Annual...

Visualizations are primarily part of which component of the AMPS model?

Explain why a company might choose to lease assets rather than purchase the asset.

What role should the board of directors have regarding an organization's investment in marketable securities? What documentation would the auditor expect to find regarding the board's oversight role?

What is meant by "dual dating"? Explain how dual dating limits the auditor's responsibility for subsequent events.

=+ Calculated summary quantities are ^ xi 5 384.26, ^ yi 5 3149.04, ^ x 2 i 5 5099.2412, ^ xi yi 5 37,850.7762, and ^ y 2 i 5 309,892.6548.

=+c. What proportion of the observed variation in the compression index can be attributed to the approximate linear relationship between the two variables?

=+d. What proportion of observed variation in removal efficiency can be attributed to the approximate linear relationship?