- 1 Marks
AAA – L3 – SA – Q4.7 – Audit evidence
Question
Analytical procedures are most reliable when applied to:
A estimates
B non-recurring transactions
C revenue and expenditure
D asset and liability balances
Answer
C
Explanation: Analytical procedures are most reliable when applied to revenue and expenditure because these areas often have predictable relationships and stable trends (e.g., cost/revenue ratios). Estimates (A) are inherently uncertain, reducing reliability. Non-recurring transactions (B) lack consistent patterns. Asset and liability balances (D) may vary due to external factors, making them less predictable.
- Tags: Analytical Procedures, Audit reliability, Expenditure, Financial analysis, Revenue
- Level: Level 3
- Topic: Audit Evidence
- Uploader: Salamat Hamid