An analytical procedure used to test the reasonableness of an account balance occurs when the auditor calculates the expected balance and compares it with the actual balance. The auditor's expected account balance may be determined by:
A) using industry standards.
B) using Dun and Bradstreet reports.
C) relating it to another account that involves financial statement articulation.
D) inquiry of the client.

Question

Quizplus · Accepted Answer

Relating the account balance to another account that involves financial statement articulation is the most reliable method of determining the expected account balance. This is because the auditor can use the relationship between the two accounts to determine reasonable account balances. Industry standards and Dun and Bradstreet reports may provide some guidance, but they may not factor in the individual circumstances of the client. Inquiry of the client may provide useful information, but it is not an analytical procedure for testing the reasonableness of an account balance.

An Analytical Procedure Used to Test the Reasonableness of an Account