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One Purpose of Performing Analytical Procedures in the Planning Phase

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Essay

One purpose of performing analytical procedures in the planning phase of an audit is to assess the client's financial condition. Explain how the assessment of a client's financial condition can affect the auditor's decisions concerning evidence accumulation in later phases of the audit.


Definitions:

Uncollectible Accounts

Accounts receivable that a company does not expect to collect due to customers' inability to pay.

Percentage of Sales

A financial ratio that helps determine the relative profitability of a product by comparing the percentage of total sales that the product represents.

Aging Analysis

A method used to estimate the collectability of accounts receivable by categorizing them according to their age, usually in 30-day increments.

Historical Relationship

Refers to the analysis of past interactions or correlations between variables to predict future trends or behaviors.

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