A. Describe how you would conduct the audit process, incorporating the analytica

Question

A. Describe how you would conduct the audit process, incorporating the analytical procedures you would use to investigate selected business transactions.

1. What steps will you take to review the company’s business transactions?

2. What would your plan be to utilize these procedures?

B. Explain the appropriate field work needed to review high-risk business transactions for cash and revenue.

1. What would you need to do in the field to investigate these?

2. Could you convey this information through charts or other supporting documentation?

C. Create a test to assess appropriate assertions for designated high-risk business transactions.

Explanation / Answer

The analytical procedures are considered an important part of audit. This mainly involves the comparison of values recorded and the expectations which are developed by auditor during carrying of audit procedures.The analytical procedures are considered to be the evaluation of both financial and non-financial data of organization. It also helps the auditor in analyzing the relationship and fluctuations which are not consistent with theother important information or the figures are deviated from the estimated or predicted figures.

Audit & Analytical procedures

Planning: The audit plan is considered an outline that how the audit will be approached inorganization. It helps the auditor to address the scope and objectives ofcarrying the audit.

Account Comparison:Comparison of Account Balances’, Computation of signification ratios of organization and compare these ratios withindustry ratio or the ratios of previous year of organization, Computation of ratios by using both the non-financial and financial data.

Report Review & Drafting: The auditor after gathering all the necessary information, will draftthe report and present it to the management of organization highlighting the transactions andfacts noted during the course of audit. The auditor on the basis of its report gives his view thatwhether the financial statement of organization gives a true or fair view or not.

What steps will you take to review the company’s business transactions?

The following steps will be taken while reviewing the business transactions:

The assets which are to be transferred in any transaction will not be encumbered by anykind of debtor any type of other undisclosed liabilities.

The parties should be authorized to enter for the transaction.

There should not be any type of pending lawsuits against the other party with whom thetransaction is taking place.

Reasons for any major variance, or a new line item in the financials.

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