Analytical procedures

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Click to edit Master subtitle style 8/22/11 Analytical procedures
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8/22/11 Last time Performing the audit focus on management assertions perform audit procedures gather audit evidence evaluate and document Audit procedures Tests of controls Tests of transactions
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8/22/11 Analytical procedures Connection among audit performance parts: Management assertions → Audit procedures → Audit evidence Substantive analytical procedures → Analytical evidence
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8/22/11 Substantive analytical procedures Four step approach Expectation development Identify material discrepancies Investigate (if necessary) Evaluation of results How do I develop a good expectation?
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8/22/11 Precision Precision: Accuracy of expectation or closeness of expectations to the correct amount (not necessarily actual) How do we obtain higher precision? More information (number of predictors) –higher precision Strength of relationship – stronger relationship - higher precision
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8/22/11 Problems with poor expectations {3C613ABA-1CA3-4D57-BF81-07BDEA3E5F32} Two potential problems with poor expectations {16245007-6DD9-4DB6-B10D-6C312154DBE3} Miss material discrepancy {44171647-EEF2-4304-9A88-F2EEC684988B} No investigation ancy when no misstatement exists vestigation Oops o problem exists
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8/22/11 Common methods of expectation formation (step Trends – last year’s balance is my expectation for current year’s balance Ratios – relationship between accounts or between account and non-financial information remains the same as the prior period
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