[Anonymous]

Question from Becker MCQ:

When applying analytical procedures during an audit, which of the following is the best approach for developing expectations?

Answer:

Identifying reasonable explanations for unexpected differences before talking to client management.

I do agree that we should anticipate management’s responses in this way. However, my problem is this: Aren’t you supposed to develop an expectation for an analytical procedure before you get the results and then see if the results line up with your expectations? Am I missing something here?

[AGI]

Hi,

I think the question ask for approach to developed expectation. It didn't say you can't have an expectation, but when you developed an expectation, you kinda have to convince yourself if the expectation is correct.

I think the whole point of the question is the word developing, maybe the person is trying to create some sort of expectation in the planning phase?

NY - CPA

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[Amay]

I would have to see the other answer choices to see why that one is the best one, but I think it is referring to the whole process of developing expectations, which includes predicting explanations for any unexpected differences.

For example, you are doing an analytical for payroll expense. You expect it to be consistent with prior year, seeing as it is an expense that rarely changes and the Company has not had any major changes in personnel. However, in developing this expectation (you expect current year to be fairly consistent with prior year) you have to be open to the idea that this might not be the case. You may have an unexpected difference. Maybe a new management position was added during the year and company had to add 100K to their payroll? You may not have known about this before you started your analytic.

Basically, developing your expectations doesn't mean to do it before or after you get the results. It refers to the all encompassing process of using a reasonable expectation, predicting results, and then analyzing them.

I hope this helps somewhat and I didn't confuse you more!

BEC: 73, 81
AUD: 85
FAR: 71, 77
REG: 74, 75...finally DONE! 😀

*This is my 2nd attempt at the CPA exam. For all of you who have failed this exam many times, given up on it, or taken a break like me, remember that it is still possible to finish what you started...failure is the opportunity to begin again more intelligently 🙂

[Author]

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