BU547 Lecture Notes - Lecture 14: Financial Statement

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The auditor can estimate the results by using both financial and non-financial information. Generally, analytical procedures are used to assess the reasonableness of amounts shown in the financial statements. The quality of the procedure is largely determined by the appropriateness and reliability of the data used. For example, it would be difficult to assess the reasonableness of interest expense if the client or the bank gave you an incorrect interest rate on the bank loan balance. Auditors often find differences between the amounts that they estimated and the amounts shown in the financial statements. Before performing the analytical procedure, an acceptable level of difference should be determined on the basis of materiality. When analyzing the results of analytical procedures, the auditor may have to perform additional work. The cica requires that the auditor maintain written or electronic records that is, working papers of the procedures performed that support the conclusions reached in performing the audit.

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