Current Ratio - answer-Current Assets / Current Liabilities
Quick Ratio - answer-(Current Assets - Inventory) / Current Liabilities
Debt to Assets Ratio - answer-Total Liabilities / Total Assets
Debt to Equity Ratio - answer-Total Liabilities / Total Owners' Equity
Return on Assets Rati...
WGU Auditing C240
Current Ratio - answer-Current Assets / Current Liabilities
Quick Ratio - answer-(Current Assets - Inventory) / Current Liabilities
Debt to Assets Ratio - answer-Total Liabilities / Total Assets
Debt to Equity Ratio - answer-Total Liabilities / Total Owners' Equity
Return on Assets Ratio - answer-Net Income / Total Assets
Profit Margin Ratio - answer-Net Income / Total Sales
Asset Turnover Ratio - answer-Sales / Average Total Assets
A/R Turnover Ratio - answer-Sales / Average Accounts Receivable
Average Collection Period Ratio - answer-(Days in Period * Average Accounts
Receivable) / Credit Sales
Inventory Turnover Ratio - answer-Cost of Goods Sold / Average Inventory
Vertical analysis is a specific type of ratio analysis used by auditors to create
- answer-common-sized financial statements.
Horizontal analysis, also referred to as - answer-trend analysis
Analytical procedures are evaluations that exclusively focus on comparisons
of relevant information across time. - answer-False-Analytical procedures are
evaluations that can focus on comparisons to relevant information, which
can include comparisons to industry data, prior periods, budgets, etc.There is
no requirement that analytical procedures compare information across time.
Found in the following section(s) of the text:
11.2: Analytical Procedures Defined
Which of the following is one of the types of analytical procedures?
-Ratio analysis
-Trend analysis
,-Regression analysis
-All of the above are examples of the types of analytical procedures -
answer-All of the above are examples of the types of analytical procedures
Each of these is an example of analytical procedures. There are multiple
types of analytical procedures. For examples, auditors can make
comparisons of financial ratios over time (ratio analysis), comparisons of
relevant information across time (trend analysis), statistical analyses (e.g.,
regression analysis), etc.
Found in the following section(s) of the text:
11.2: Analytical Procedures Defined
In which stages are analytical procedures required?
-Planning and Evidence gathering
-Planning, Evidence gathering, and Final review
-Planning and Final review
-Evidence gathering and Final review
-Analytical procedures are not required at any of these stages - answer-
Planning and Final review
Analytical procedures are required at the planning and overall review stages
of the engagement.
Found in the following section(s) of the text:
11.2: Analytical Procedures Defined
Since the purpose of analytical procedures performed at the planning stage
of the audit is primarily to identify and assess the risk of material
misstatement, these procedures are commonly called - answer-risk
assessment analytical procedures.
final review analytical procedures - answer-In addition to analytical
procedures performed at the planning stage of the audit, the auditor is
required to perform analytical procedures to assist her in forming an overall
conclusion regarding the financial statements as a whole.
For risk assessment analytical procedures to be effective at identifying
unusual relationships or trends, it is important that the auditor have an
understanding of the client's business and its environment. - answer-True-
This statement is true.
,Found in the following section(s) of the text:
11.3: Risk Assessment and Final Review Analytical Procedures
Which of the following phases of an audit engagement requires the use of
anlaytical procedures according to auditing standards?
-Planning phase
-Fieldwork phase
-Final Review phase
-All of the above
-Two of the above - answer-Two of the above
Auditing standards require the use of analytical procedures during the
Planning and Final Review phases of the audit. Although not required,
auditors frequently use analytical procedures during the Fieldwork phase of
the audit.
Found in the following section(s) of the text:
11.3: Risk Assessment and Final Review Analytical Procedures
Which of the following is the first step of the substantive analytical
procedures process?
set an acceptable deviation
set an expectation
determine hypotheses for significant differences
compare the client's number to the auditor's expectation - answer-set an
acceptable deviation
Auditors should first set an acceptable deviation amount, and can then use
this amount, along with the auditor's expectation, to determine whether
there is a significant difference between the client's reported number and
the auditor's expectation.
Found in the following section(s) of the text:
11.4: An Overview of the Substantive Analytical Procedures Process
If the difference between the auditor's estimate and the reported balance is
greater than the tolerable difference identified by the auditor, the auditor
should always conclude that the account balance is NOT fairly stated. -
answer-False
This is not necessarily true. The auditor should next determine possible
explanations as to why the difference is greater than the tolerable difference.
Some of these explanations may include the fact that the procedure was a
, weak procedure. The auditor should obtain corroborating evidence before
concluding that the balance is not fairly stated.
Found in the following section(s) of the text:
11.4: An Overview of the Substantive Analytical Procedures Process
the most important part of the analytical procedures process (AICPA 2008) -
answer-Forming precise expectations
According to AICPA (2008) guidance, which of the following is the most
important analytical procedure step for an auditor to complete?
compare the client's reported number to the auditor's expectation
set an acceptable deviation
generate hypotheses for significant differences
None of the above - answer-None of the above
According to AICPA (2008) guidance, the most important analytical
procedure step for auditors to complete is to effectively set an expectation
for the client's reported number.
Found in the following section(s) of the text:
11.5: Substantive Procedures Steps 1 and 2
If the auditor's expectation is close to the client's reported number, she
should conclude that she has formed a precise expectation. - answer-False
A precise expectation is achieved when the auditor has formed an
expectation that is close to what the client should be reporting, even if this is
not close to the number that the client is reporting.
Found in the following section(s) of the text:
11.5: Substantive Procedures Steps 1 and 2
Which of the following could help explain a significant difference between the
client's reported number and the auditor's expectation? (Choose all that
apply.)
-The client could be unaware of a material error in the financial statements
-The client could have entered into new business transactions that affected
the reported number
-The client could be committing fraud - answer-Answer: The client could have
entered into new business transactions that affected the reported number;
The client could be committing fraud; The client could be unaware of a
material error in the financial statements
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