Analytical Procedures \u2013 CA Inter Audit MCQ<\/h1>\n
Question 1.
\nWhat are analytical procedures?
\n(a) Substantive tests designed to assess control risk
\n(b) Substantive tests designed to evaluate the validity of management\u2019s representation letter
\n(c) Substantive tests designed to study relationships between financial and non-financial information
\n(d) All of the above
\nAnswer:
\n(c) Substantive tests designed to study relationships between financial and non-financial information<\/p>\n
Question 2.
\nWhich of the following is not an analytical procedure?
\n(a) Tracing of purchases recorded in the purchase book to purchase invoices
\n(b) Comparing aggregate wages paid to number of employees
\n(c) Comparing the actual costs with standard costs
\n(d) All of them are analytical procedures
\nAnswer:
\n(a) Tracing of purchases recorded in the purchase book to purchase invoices<\/p>\n
Question 3.
\nAnalytical procedures issued in the planning stage of an audit, generally:
\n(a) helps to determine the nature, timing and extent of other audit procedures
\n(b) directs attention to potential risk areas
\n(c) indicates important aspects of business
\n(d) all of the above
\nAnswer:
\n(d) all of the above<\/p>\n
Question 4.
\nThe basic assumption underlying the use of analytical procedures is:
\n(a) It helps the auditor to study relationship among elements of financial information
\n(b) Relationship among data exist and continue in the absence of known condition to the contrary
\n(c) Analytical procedures will not be able to detect unusual relationships
\n(d) None of the above
\nAnswer:
\n(b) Relationship among data exist and continue in the absence of known condition to the contrary<\/p>\n
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Question 5.
\nWhat is the primary objective of analytical procedures used in the overall review stage of an audit?
\n(a) To help to corroborate the conclusions drawn from individual components of financial statements
\n(b) To reduce specific detection risk
\n(c) To direct attention to potential risk areas
\n(d) To satisfy doubts when questions arise about a client’s ability to continue
\nAnswer:
\n(a) To help to corroborate the conclusions drawn from individual components of financial statements<\/p>\n
Question 6.
\nWhich of the following is true?
\n(a) Substantive Analytical Procedures are generally more applicable to large volume of transactions that tend to be more predictable over time.
\n(b) Different types of analytical procedures provide same levels of assurance.
\n(c) Determination of suitability of Substantive Analytical procedures is not influenced by the nature of assertion
\n(d) All of the above
\nAnswer:
\n(a) Substantive Analytical Procedures are generally more applicable to large volume of transactions that tend to be more predictable over time.<\/p>\n
Question 7.
\nAnalytical procedures compare one result to another. These comparisons may be with all the following except:
\n(a) Similar information about top-performing subsidiaries
\n(b) Anticipated results (such as budgets and forecasts, or auditor expectations)
\n(c) Comparable information for prior periods
\n(d) Non-financial information
\nAnswer:
\n(a) Similar information about top-performing subsidiaries<\/p>\n
Question 8.
\nPerforming analytical procedures may be thought of as a four-phase process. The first phase is:
\n(a) compare the expected value to the recorded amount
\n(b) formulate expectations
\n(c) evaluate the impact of the differences between expectation and recorded amounts on the audit | and the financial statements
\n(d) investigate possible explanations for a difference between expected and recorded values
\nAnswer:
\n(b) formulate expectations<\/p>\n
Question 9.
\nWhich of the following is correct:
\n(a) As per the Standard on Auditing (SA) 520 \u201cAnalytical Procedure\u201d the term “analytical procedures\u201d means evaluations of financial information through analysis of financial data.
\n(b) As per the Standard on Auditing (SA) 520 “Analytical Procedure\u201d the term “analytical procedures\u201d means evaluations of financial information through analysis of non-financial data.
\n(c) As per the Standard on Auditing (SA) 520 “Analytical Procedure\u201d the term “analytical procedures” means evaluations of financial information through analysis of plausible relationships among both financial and non-financial data.
\n(d) As per the Standard on Auditing (SA) 520 “Analytical Procedure\u201d the term “analytical procedures” means evaluations of financial information through ratio analysis
\nAnswer:
\n(c) As per the Standard on Auditing (SA) 520 “Analytical Procedure\u201d the term “analytical procedures” means evaluations of financial information through analysis of plausible relationships among both financial and non-financial data.<\/p>\n
Question 10.
\nWhich of the following statement is correct:
\n(a) Substantive analytical procedures are generally more applicable to large volumes of transactions that tend to be predictable over time
\n(b) Substantive analytical procedures are generally less applicable to large volumes of transactions that tend to be predictable over time
\n(c) Substantive analytical procedures are generally more applicable to small volumes of transactions that tend to be predictable over time
\n(d) All statements are correct
\nAnswer:
\n(a) Substantive analytical procedures are generally more applicable to large volumes of transactions that tend to be predictable over time<\/p>\n
Question 11.
\nA basic premise of using analytical procedures is that:
\n(a) there exist plausible relationships among data that is highly accurate
\n(b) there exist plausible relationships among data that can reasonably be expected to continue
\n(c) they are a good indicator of fraud and error
\n(d) they are essential in the planning process
\nAnswer:
\n(b) there exist plausible relationships among data that can reasonably be expected to continue<\/p>\n
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Question 12.
\nTrend analysis is:
\n(a) the analysis of account balances or changes in account balances within an accounting period in terms of their reasonableness
\n(b) the analysis of changes in an account balance over time
\n(c) use of sophisticated statistical analysis, including artificial intelligence techniques, to examine large volumes of data with the objective of indicating hidden or unexpected information or patterns
\n(d) the comparison of relationships between firms in an industry
\nAnswer:
\n(b) the analysis of changes in an account balance over time<\/p>\n
Question 13.
\nExpectations are developed by identifying plausible relationships that are reasonably expected to exist based on the auditor\u2019s understanding of the client and of the industry. These relationships may be determined by comparisons with the following sources:
\n(a) Data from various company divisions
\n(b) Non-financial information
\n(c) Data from national cross-industry surveys
\n(d) Comparable information for future periods
\nAnswer:
\n(b) Non-financial information<\/p>\n
Question 14.
\nWhich of the following statements is not true of analytical procedures as substantive tests?
\n(a) are used as a confirmation of an account
\n(b) include tests of details (either of balances or of transactions) and analytical procedures
\n(c) identify situations that require increased use of other procedures (i.e. tests of control, substantive audit procedures),but seldom to reduce audit effort
\n(d) are designed to reduce detection risk relating to specific financial statement assertions
\nAnswer:
\n(a) are used as a confirmation of an account<\/p>\n
Question 15.
\nSubstantive analytical procedures have certain advantages. Which of the following is an advantage of substantive analytical procedures?
\n(a) analytical procedures are effective when applied to the financial statements of the entity as a whole rather than when applied to financial statements of components of a diversified entity
\n(b) obtaining data used to develop an expectation and ensuring the reliability of that data at an appropriate level of disaggregation can account for a substantial amount of the time
\n(c) substantive analytical procedures deliver the desired results every year
\n(d) substantive analytical procedures often enable auditors to focus on a few key factors that affect the account balance
\nAnswer:
\n(d) substantive analytical procedures often enable auditors to focus on a few key factors that affect the account balance<\/p>\n
Question 16.
\nWhich of the following would NOT be considered an analytical procedure?
\n(a) Computing accounts receivable turnover by dividing credit sales by the average net receivables
\n(b) Estimating payroll expense by multiplying the number of employees by the average hourly wage rate and the total hours worked
\n(c) Projecting an error rate by comparing the results of a statistical sample with the actual population characteristics
\n(d) Developing the expected current year sales based on the sales trend of the prior 5 years
\nAnswer:
\n(c) Projecting an error rate by comparing the results of a statistical sample with the actual population characteristics<\/p>\n
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Question 17.
\nFor all audits of financial statements made in accordance with generally accepted auditing standards, the use of analytical procedures is required to some extent:<\/p>\n