- 10 Marks
AA – L2 – Q49 – Analytical Procedures
Explain reasons for changes in current ratio, gross profit margin, and inventory holding period at audit planning. Explain automated tools and techniques and their use at the audit planning stage.
Question
Analytical procedures are an important and powerful tool for auditors explaining the performance of a business. ISAs 315 and 320 require the auditors to apply analytical procedures at the planning and overall review stages of the audit.
Required
(a) Explain the possible reasons for the following changes in accounting ratios found at the planning stage of the audit:
(i) an increase in the current ratio;
(ii) a decrease in the gross profit margin; and
(iii) an increase in the inventory holding period.
(b) Explain what automated tools and techniques are and describe how they can be used at the planning stage of the audit.
Find Related Questions by Tags, levels, etc.
- Tags: Accounting Ratios, Analytical Procedures, Audit Planning, Risk Assessment
- Level: Level 2
- Topic: Audit Evidence
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