7-34 (OBJECTIVES 7-4, 7-5) Analytical procedures are an important part of the audit process
and consist of the evaluation of financial information by the study of plausible relation-
ships among financial and nonfinancial data. Analytical procedures may be done during
planning, as a substantive test, or as a part of the overall review of an audit.
The following are various statements regarding the use of analytical procedures:
1. Should focus on enhancing the auditor’s understanding of the client’s business and
the transactions and events that have occurred since the last audit date
2. Should focus on identifying areas that may represent specific risks relevant to the
audit
3. Require documentation in the working papers of the auditor’s expectation of the
ratio or account balance
4. Generally use data aggregated at a lower level than the other stages
5. Should include reading the financial statements and notes to consider the adequacy
of evidence gathered
6. Not required during this stage
7. Involve reconciliation of confirmation replies with recorded book amounts
8. Use the preliminary or unadjusted working trial balance as a source of data
9. Do not result in detection of misstatements
10. Designed to obtain evidential matter about particular assertions related to account
balances or classes of transactions
For each of the 10 statements listed above, select the stage of the audit for which the state-
ment is most accurate using the following responses:
a. Planning the audit
b. Substantive testing
c. Overall review
d. Statement is not correct concerning analytical procedures.*
Required
Required
*
Based on AICPA question paper, American Institute of Certified Public Accountants.
AUDIT EVIDENCE 225
7-35 ACL Problem (OBJECTIVE 7-4) This problem requires the use of ACL software, which can
be accessed by following the instructions available on the textbook website. Information
about downloading and using ACL and the commands used in this problem can also be
found on the textbook website. You should read all of the reference material preceding the
instructions about “Quick Sort” before locating the appropriate command to answer parts
a. through f. For this problem, use the file labeled “Payroll_details” in the “Payroll” subfolder
in the ACL_Rockwood project. The suggested command or other source of information
needed to solve the problem requirement is included at the end of each question.
a. Determine the number of payroll transactions in the file. (Read the bottom of the
Payroll_detail file screen.)
b. Determine the largest and smallest payroll transaction (gross pay) for all pay periods
combined. (Quick Sort)
c. Determine total gross pay for all pay periods. (Total)
d. Determine and print gross pay by pay period. (Summarize)
e. Recalculate net pay for each payroll transaction for all pay periods and compare it to
the amount included in the file. (Filter)
f. Determine whether there are any gaps in the pay period sequence. If you were to iden-
tify gaps in the sequence, what would be your concern? (Gaps)
g. For parts a. through f. above, identify the type of audit evidence used for each proce-
dure. How might the auditor use this evidence in testing of payroll expense
