Analytical procedures are audit methods of evaluating financial statement accounts by studying and comparing relationships among financial and nonfinancial data.The primary purpose of analytical procedures conducted during the planning stages is to
A) Identify the appropriate schedules to be prepared by the client.
B) Identify the types of errors or frauds that can occur in transactions.
C) Identify unusual conditions that deserve additional audit effort.
D) Determine the existence of unrecorded liabilities or overstated assets.

Question

Quizplus · Accepted Answer

The primary purpose of analytical procedures conducted during the planning stages is to identify unusual conditions that deserve additional audit effort. These procedures help the auditor to gain an understanding of the client's business and financial performance, and to identify areas of financial statement risk. By conducting analytical procedures, the auditor can identify significant changes or unusual relationships that may indicate the presence of material misstatement in the financial statements. The auditor can then focus additional audit effort on these areas to ensure that the financial statements are fairly presented. Option A is incorrect because analytical procedures do not identify the appropriate schedules to be prepared by the client. Option B is incorrect because analytical procedures are not designed to specifically detect errors or frauds. Option D is incorrect because analytical procedures may provide some indication of the existence of unrecorded liabilities or overstated assets but this is not the primary purpose of analytical procedures conducted during the planning stage of an audit.

Analytical Procedures Are Audit Methods of Evaluating Financial Statement Accounts