Analytical Procedures Are One Type of Evidence Gathering Procedure

question 10

Essay

Analytical procedures are one type of evidence gathering procedure. According to auditing standards, there are five general forms of analytical procedures. Auditing standards also provide examples of five sources of information for analytical procedures.Required:Describe three of the five general forms of analytical procedures. For each form, describe a typical source of the information for the form. For each source, include any questions or concerns an auditor would have about the reliability or relevancy of the source.

Recognize the possibility of abnormal consumer responses to income and price changes, including Giffen goods and inferior goods.

Apply consumer choice theory to analyze real-world economic situations and experiments.

Understand the concept of consumer optimum and how it is determined by the intersection of budget constraints and indifference curves.

Calculate the optimum consumption bundle given a consumer's income and prices of goods.

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Definitions:

Fixed Costs

Costs that do not vary with the level of output or sales, such as rent, salaries, and insurance premiums.

Break-Even Point

The sales level at which total revenues equal total costs, resulting in no profit but no loss.

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted, showing how much contributes to fixed expenses and profits.

Sales Mix

Sales mix refers to the proportion of different products or services sold by a company, impacting its overall profitability and performance.