The following are examples of analytical procedures. Select from the pop-up boxes the source of information that auditors would use for analytics for each example. Double-click on each blank box to see a list of answer choices and click on your selection. Each choice may be used once, more than once, or not at all.
1. If a client’s prior reported sales were 120,000 in Y1, 130,000 in Y2, and 140,000 in Y3, the auditor likely will predict Y4 sales to be approximately 150,000 based on the trend
2. If the auditor determines the sales increased by 25% for the year, accounts receivable should increase by approximately that amount
3. If the number of hours worked increased by 30%, the auditor will expect an increase in labor costs of approximately
30%
4. If management prepares a budget at the beginning of the period reporting forecasted cost of sales to be 100,000, the auditor will expect cost of sales to approximate 100,000 at year end
5. If the usual inventory turnover ratio of competitors is 10 times per year, the auditor will expect the client’s turnover ratio to be approximately 10 times
Answer choices
a) Comparable info from the client's industry
b) Related nonfinancial info
c) Relationships among financial data
d) Financial info from comparable prior periods
e) Anticipated results
.
