There Are Many Types of Analytical Procedures That the Auditor

question 56

Multiple Choice

There are many types of analytical procedures that the auditor can conduct during the planning stage of the financial statement audit.What is the purpose of comparing the gross margin with prior years and looking for large fluctuations?

• A)to understand the client's industry and business
• B)to assess going concern
• C)to identify possible misstatements
• D)to reduce detailed tests

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Definitions:

Premium

An amount paid in excess of the nominal or face value, often in relation to insurance policies, bonds, or shares.

Effective Interest Rate

The actual return on an investment, taking into account the effect of compounding interest as opposed to the nominal rate.

Contract Interest Rate

The interest rate specified in a loan agreement or contract, typically fixed for the life of the loan.

Face Value

The nominal value or dollar value of a security stated by the issuer, also known as par value, especially relevant for bonds and stock certificates.