Question

Analytical procedures used in planning an audit should focus on identifying

a. Areas that may represent specific risks relevant to the audit.

b. The various assertions that are embodied in the financial statements

c. Material weaknesses in the internal control structure

d. The predictability of financial data from individual transactions.

Answer 1

Answer:

correct answer is option a . Areas that may represent specific risks relevant to the audit .

Explanation:

Analytical procedures are used under two stages of audit , planning stage and performance of audit stage.

Analytical procedure are used to calculate ratios to generate expected value to compare current year figures with past years .

Under planning stage , analytical procedure are used to identify the areas that represents unexpected figures in comparison to past years and represents risk of material misstatements.

after identification of such areas , audit plans and procedure are made for performance of audit and review of financial statements to find the material misstatements in financial stataements ,if any.

thus option A is correct.

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Assertions are checked at the time of performing an audit , and not at the planning stage . thus option b is incorrect.

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Weaknesses in internal control are identified through the audit of Internal control system of an organisation. Analytical procedures are ratios of financial statement items , at planning stage these procedures do not focus to identify Weaknesses in internal control . Thus option C is also incorrect.

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Predictability of financial data from individuat transaction is usually done through analytical procedures performed at the time of performing audit , and not at the planning stage . thus option d is also incorrect.

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