Question

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 pertains to Dough Ball Ltd one of your audit clients.

1. They bake bread products which it supplies to numerous supermarkets and petrol station shops.
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 any time.
4. The company employs a small number of administration staff and a reasonably large labour force. Temporary staff are employed around public holiday periods when bakery product 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 and prior year is available to your firm as well as the draft financial statements for the financial year-end 30 June 2019.

REQUIRED:

1. Justify the performance of analytical procedures as a risk assessment procedure.
2. Detail the analytical review procedures you might conduct at the planning stage for your audit of

Dough Ball Ltd based on the information provided.

Answer 1