[Anonymous]

When planning a review of an audit client’s interim financial statements, which of the following procedures should the accountant perform to update the accountant’s knowledge about the entity’s business and its internal control?

A. Perform analytical procedures on selected accounts by comparing the interim amounts to the amounts for the previous audited fiscal year-end

B. Inquire of the entity’s outside legal counsel about the status of any previous pending litigation and any new litigation involving the entity

C. Select a sample of material revenue transactions occurring during the interim period and examine supporting documentation

D. Consider the results of audit procedures performed with respect to the current year’s financial statements

D. When performing a review of interim financial information, the accountant is required to become knowledgeable about the entity’s business and its internal control in order to focus the inquiries and analytical procedures. The procedures to obtain this knowledge include the following:

Reading documentation of the preceding year’s audit and of reviews of prior interim period(s) of the current year and corresponding interim period(s) of the prior year to the extent necessary, based on the accountant’s judgment, to enable the accountant to identify matters that may affect the current-period interim financial information

Reading the most recent annual and comparable prior interim period financial information

Considering the results of any audit procedures performed with respect to the current year’s financial statements

Inquiring of management about changes in the entity’s business activities

Inquiring of management about the identity of, and nature of transactions with, related parties

Inquiring of management about whether significant changes in internal control have occurred subsequent to the preceding annual audit or prior review of interim financial information

The review does not contemplate obtaining corroborating evidence for responses to inquiries concerning litigation, claims, and assessments. The accountant is also not required to perform testing on transactions. Analytical procedures would involve comparing interim financial information with comparable information for the immediately preceding interim period (not the previous audited fiscal year-end).

Terms

Analytical Procedures

Interim Financial Information

Litigation

Review

References

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Man these questions are just plain confusing. How in the world does “Consider the results of audit procedures performed with respect to the current year’s financial statements” help the accountant to “update the accountant’s knowledge about the entity’s business and its internal control”?