QUESTION TWO $[30]$

In planning an audit, the use of analytical procedures may be used to assist in identifying and

assessing the risks of material misstatement. The following information pertaining by Dibango

$($Pty$)$ Ltd one of your audit clients:

$1.$ Dibango $($Pty$)$ Ltd bakes bread products which it supplies to numerous supermarket

petrol station shops etc throughout KZN

$2.$ The company operates from one central bakery and uses a fleet of vans to deliver to its

customers

$3.$ Minimal inventory is held at anytime

$4.$ The company employs a small number of administration staff and the reasonably large

labour force. temporary staff are employed around public holiday periods when bakery

products sales increase.

$5.$ The accounts department maintains detailed production and delivery records.

Reasonably detailed monthly accounts are prepared

$6.$ there is a detailed annual budget which is broken down into months

All of the above documentation for the current prior year is available to your firm as well as

the draft financial statements for the financial year $-$end $30$ October $2021.$

YOU ARE REQUIRED TO:

a$)$ Justify the performance of analytical procedures as a risk assessment procedure. $(4)$

b$)$ Briefly discuss the characteristics which must be present in data if the auditor is to

use the data to perform analytical procedures $($at any stage of the audit$).(4)$

c$)$ Discuss the factors you would consider in deciding whether analytical procedures will

be appropriate substantive tests for a particular account heading when conducting

further audit procedures on those account headings. $(8)$

d$)$ Detail the analytical review procedures you might conduct at the planning stage for

your audit at the Dibango $($Pty$)$ Ltd based on the information provided.