CA Inter Audit Lec 29 & 30 (SA 520)

520.1

Analytical procedures issued in the planning stage of an audit, generally:

• a) helps to determine the nature, timing and extent of other audit procedures

• b) directs attention to potential risk areas

• c) indicates important aspects of business

• d) All of the above

520.5

The basic assumption underlying the use of analytical procedures is:

• a)  It helps he auditor to study relationship among elements of financial information

• b) Relationship among data exist and continue in the absence of known condition to the contrary

• c) Analytical procedures will not be able to detect unusual relationships

• d) None of the above

520.6

What are analytical procedures?

• a) Substantive tests designed to assess control risk

• b) Substantive tests designed to evaluate the validity of management’s representation letter

• c) Substantive tests designed to study relationships between financial and non-financial data

• d) All of the above

520.9

Which of the following is correct:

• a) As per the Standard on Auditing (SA) 520 “Analytical Procedure” ‘the term “analytical procedures” means evaluations of financial information through analysis of financial data.

• b)  As per the Standard on Auditing (SA) 520 “Analytical Procedure” ‘the term “analytical procedures” means evaluations of financial information through analysis of non-financial data.

• c)  As per the Standard on Auditing (SA) 520 “Analytical Procedure” ‘the term “analytical procedures” means evaluations of financial information through analysis of plausible relationships among both financial and non-financial data.

• d) As per the Standard on Auditing (SA) 520 “Analytical Procedure” ‘the term “analytical procedures” means evaluations of financial information through analysis of plausible relationships among both financial and non-financial data.

520.10

Statement I As per the Standard on Auditing (SA) 520 “Analytical Procedures”, the term “analytical procedures” means evaluations of financial information through analysis of plausible relationships among financial data.

Statement II Analytical procedures also encompass such investigation as is necessary of identified fluctuations or relationships that are inconsistent with other relevant information or that differ from expected values by a significant amount.

• a) Only Statement I is correct

• b) Only Statement II is correct

• c) Both statements are correct

• d) Both Statements are incorrect

520.11

Which of the following is not an example of Analytical Procedures having consideration of comparisons of the entity’s financial information?

• a) Comparable information for prior periods.

• b)  Anticipated results of the entity, such as budgets or forecasts, or expectations of the auditor, such as an estimation of depreciation.

• c)  Similar industry information, such as a comparison of the entity’s ratio of sales to accounts receivable with industry averages or with other entities of comparable size in the same industry.

• d) Among elements of financial information that would be expected to conform to a predictable pattern based on the entity’s experience, such as gross margin percentages.

520.12

……………is the comparison of current data with the prior period balance.

• a) Ratio Analysis

• b) Trend analysis

• c) Reasonableness test

• d) Structural

  Modelling

520.13

Auditor Compares Gross Profit Ratio with that of previous year and it is discovered that there has been a fall in the ratio. This is an example of:

• a) Analytical Procedure

• b) Test of Controls

• c) Walk through Test

• d) Audit Sampling

520.14

Statement1: Analytical procedures are more useful while conducting the audit and at the completion phase and are of no use at the planning stage.

Statement 2 : In the planning stage, audit procedures assist the auditor in understanding the client’s business and identifying the areas of potential risks.

• a) Statement 1& 2 are correct

• b) Statement 1 & 2 are incorrect

• c) Only Statement 1 is correct

• d) Only Statement 2 is correct

520.18

The auditor of Vishwas Ltd wants to know from you which of the following methods are analytical

procedures

I. Comparison of client and industry data

II. Comparison of client data with similar prior period data

III. Comparison of client data with client-determined expected results

IV. Comparison of client data with auditor-determined expected results

• a) I, II and III only

• b) I &, II only

• c) III &, IV only

• d) I, II, III and IV