Analytical Procedures (SAS 56)

Analytical Procedures (SAS 56) - extent In the As a In the...

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Analytical Procedures (SAS 56) Definition  -- “evaluations of financial  information made by a study of plausible  relationships among both financial and  non-financial data”  Sometimes referred to as “tests of  reasonableness”  may be simple  comparisons, or can be more involved,  such as ratios, & trend analysis
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Analytical Procedures (SAS 56) Analytical procedures serve 3 broad  purposes 1. Required  in planning 2. Useful as a substantive procedure  (but not “required” ) 3. Required  as a final review The quality of the auditor’s “expectation”  is the key to the usefulness of analytics!
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For all audits of financial statements made in accordance with  [GAAS], the use of analytical procedures is required to some 
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Unformatted text preview: extent In the As a In the planning substantive review stage test stage a. Yes No Yes b. No Yes No c. No Yes Yes d. Yes No No [See Ch #5, P #26] Analytical Procedures (continued) For substantive purposes effectiveness & efficiency varies with 4 considerations Nature of the assertion Predictability of the relationship Stable versus unstable environment Income statement accounts v. balance sheet items Degree of management discretion Availability & reliability of data Precision of expectation (expectation based on a low level of aggregation are more precise)...
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Analytical Procedures (SAS 56) - extent In the As a In the...

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