Auditing Burlingham Bees
Burlingham Bees 1. AU 329 a. Based on the standards, describe the guidelines for developing an expectation and conducting analytical procedures when those procedures are intended to provide substantive evidence (para. 9-22). i. .09 Reliance on substantive tests: may be derived from tests of detail, from analytical procedures, or from a combination of both. The decision about which procedure to use is based on the auditor’s judgment. ii. .10 Level of assurance: analytical procedure may provide effective level of assurance for some assertions, but some of the assertions may be more effective to reach desired level of assurance by using test of details. iii. .11 Identifying potential misstatement: identifying potential misstatement depends on: 1. The nature of assertion
.12 Analytical procedures may test for assertions in which potential misstatements would not be apparent from an examination of the detail evidence or in which detailed evidence is not readily available. 2. The plausibility and predictability of the relationship
.13 Reasons of making relationship plausible are that data sometimes appear to be related when they are not and sometimes an unexpected relationship can provide important evidence when appropriately scrutinized.
.14 More predictable relationships are required to develop the expectation as higher levels of assurances are desired from analytical procedure. i. Relationships in a stable environment are more predictable. ii. Relationships involving income statement accounts are more predictable than relationships involving only balance sheet. iii. Relationships involving transactions subject to management discretion are sometimes less predictable. 3. The availability and reliability of the data used to develop the expectation
.15 To test completeness assertion, expected sales for some entities might be developed from production statistics or square feet of selling
.12 Analytical procedures may test for assertions in which potential misstatements would not be apparent from an examination of the detail evidence or in which detailed evidence is not readily available. 2. The plausibility and predictability of the relationship
.13 Reasons of making relationship plausible are that data sometimes appear to be related when they are not and sometimes an unexpected relationship can provide important evidence when appropriately scrutinized.
.14 More predictable relationships are required to develop the expectation as higher levels of assurances are desired from analytical procedure. i. Relationships in a stable environment are more predictable. ii. Relationships involving income statement accounts are more predictable than relationships involving only balance sheet. iii. Relationships involving transactions subject to management discretion are sometimes less predictable. 3. The availability and reliability of the data used to develop the expectation
.15 To test completeness assertion, expected sales for some entities might be developed from production statistics or square feet of selling