Analytical Procedures Consist of Evaluations of Financial Information Made by a Study

question 27

Essay

Analytical procedures consist of evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data.They range from simple comparisons to the use of complex models involving many relationships and elements of data.They involve comparisons of recorded amounts or ratios developed from recorded amounts to expectations developed by auditors.
Required:
A. Analytical procedures are used for these broad purposes:
1. To assist the auditor in planning the nature, timing, and extent of other audit procedures.
2. As a substantive test to obtain evidential matter about particular assertions related to account balances or classes of transactions.
3. As an overall review of the financial information in the final review stage of the audit.
A. Describe the broad purposes of analytical procedures.
B. An auditor's expectations are developed from the following sources of information:
B. Identify the sources of information from which an auditor develops expectations.

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Definitions:

Significant Gains

Large positive changes in the financial or operational performance of a company.

Managerial Control Issues

Managerial control issues refer to challenges or problems in overseeing and directing the activities and performance of an organization or its employees.

Maximize Stock Price

It refers to strategies and measures taken by a company aimed at increasing the market value of its shares.

Target Firm's Shareholders

Individuals or entities that own shares in a company that is the subject of a merger or acquisition.