Analytical Procedures Are Audit Methods of Evaluating Financial Statement Accounts

question 67

Multiple Choice

Analytical procedures are audit methods of evaluating financial statement accounts by studying and comparing relationships among financial and nonfinancial data. The primary purpose of analytical procedures conducted during the planning stages is to:

• A)identify the appropriate schedules to be prepared by the client.
• B)identify the types of errors or frauds that can occur in transactions.
• C)identify unusual conditions that deserve additional audit effort.
• D)determine the existence of unrecorded liabilities or overstated assets.

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Definitions:

Annual Amortization

The process of spreading the cost of an intangible asset over its useful life on a yearly basis.

Bond Discount

The amount by which the market price of a bond is lower than its principal amount or face value, often due to increases in market interest rates.

Bond Premium

The amount by which the selling price of a bond exceeds its face value, often resulting from interest rates that are lower than the bond's coupon rate.

Market Rate

The prevailing price or interest rate available in the open market for goods, services, or securities.