Significant unexpected fluctuations identified by analytical procedures will necessitate a(n): Select one: a. Auditor investigation. b....

Significant unexpected fluctuations identified by analytical procedures will necessitate a(n):

Select one:

a. Auditor investigation.

b. Explanation in the representation letter.

c. Review of internal control.

d. Qualified opinion.

Solutions

Expert Solution

The correct answer for the question is Option A - Auditor Investigation. Analytical procedures are procedures under which the auditor builds plausible relationship for an account or class of accounts based on the financial and non-financial data. The auditor compares the expected balances with the actual balances in order to understand if the account is within the ranges acceptable by the auditor. If there are any unexpected fluctuations, the auditor will perform a further investigation to understand the nature and cause of the variance and if there should be changes in the planned audit procedures based on the observations.

Option B is incorrect. A significant unexpected fluctuation would not require an explanation in the represent letter as such. An auditor would perform client inquiries with respect to the fluctuation but would not require any mention of it in the representation letter if the auditor is satisfied with the client's explanations as such.

Option C is incorrect. A review of internal control is not required for a significant unexpected fluctuation identified by the auditor. The immediate step after identifying such unexpected fluctuations would be to investigate the matter further.

Option D is incorrect. An immediate step after finding the significant unexpected fluctuation would not be to issue a Qualified opinion. The auditor has to first investigate the matter. Hence, this option is incorrect.

ekkarill92 answered 2 years ago

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