ACCA Advanced Audit and Assurance (AAA) Practice Exam

Why is analytical review included in the audit procedures?

1. To verify the existence of assets

2. To analyze trends and relationships in data

3. To confirm compliance with laws

4. To evaluate responsibility of management

The correct answer is: To analyze trends and relationships in data

Analytical review is included in the audit procedures primarily to analyze trends and relationships in data. This process involves comparing current financial data to prior periods, industry benchmarks, or expected results. By examining variations and trends, auditors can identify unusual fluctuations that may require further investigation. This helps in assessing whether the financial statements present a true and fair view of the entity's financial position. The use of analytical procedures can also enhance the overall efficiency of the audit by enabling auditors to focus their efforts on areas that show significant anomalies or deviations from expected patterns. Additionally, these analyses can provide insights into the entity's operations and financial health, which can be pivotal in understanding the broader context of the financial statements. While verification of the existence of assets, ensuring compliance with laws, and evaluating management's responsibility are all critical aspects of an audit, they do not encapsulate the primary aim of analytical review, which is fundamentally about examining data patterns and relationships to inform the audit process.