Question

What factors would affect your decision as an auditor to analyze an account balance included in the acquisition and payment cycle? Provide at least four accounts that are commonly analyzed in audits and the types of analyses made.

Answer 1

FACTOR AFFECT THE DECISION AS AN AUDITOR TO ANALYZE AN ACCOUNT BALANCE INCLUDED IN ACQUISITION AND PAYMENT CYCLE

Auditor should compare current year expenses totals with prior year to uncover misstatements in account payable as well as in the expense account. Because of double entry accounting, a misstatements of an expense account usually also result in an equal misstatements of account payable therefore comparing current expenses such as rent, utilities and other regularly scheduled bill with prior year is an effective procedure for analysing account payable when expenses from year to year are expected to be relatively stable.

ACCOUNTS THAT ARE COMMONLY ANALYSED IN AUDIT ARE

1.property tax expenses

2.payroll expenses

3.Rent expenses