[Anonymous]

Accordingly, analytical procedures are not effective under the following circumstances:

-Identification of RPT

-Identification of unauthorized transaction

-Noncompliance acts

Additionally, analytical procedures are not particularly useful on predictable accounts.

Can someone please explain these why? So what if the accounts are predictable? So what if they are NOT predictable?

P.S. I’m really lost now. This is going to be my second time to sit for AUD and I have been studying AUD full-time since June. I thought I was ready on 8/15 but I had to push it back to 8/30 when I decided to buy Becker’s final review last minute. I felt so much ready last week while working on hundreds of MCQs. I scored 83% on my first practice final test last week until I had this ongoing 6-day drama with my husband. I begged him to back off until after my test on 8/30. He promised to spare me but he broke his promise. I lost 6 critical days of quality study from last week till this day. I cried all day and night yesterday and still crying early this afternoon.

I got back up this morning then worked on my second practice test. I struggled so bad on the tricky words of MCQs. I could hardly focus but I still kept on. I finished it and scored 73% only. I was totally distraught. English is not my first language so how could someone like me catch every tricky word of AUD if something is bothering me. It so tough. I could not even see the difference of the words reliability and relevance now.

I fought so hard and wept to God in prayers. I am feeling a little better now.

I will fight for my dream because God is with me! He will provide for the grace I need to win this test this week!!!

[Anonymous]

1. Related party transactions are under management's discretion. According to the standards, analytical procedures do not work well with transactions that are under mgt's discretion. These discretions can be very erratic. Other management discretion transactions such as advertising expense – mgt can say $1,000,000 spend on this year and $10,000 on the next year. It's very erractic and AP doesn't work well.

However if you compare with bonds payable of $1,000,000 with an effective interest rate of 10%, you always have cash payment of interest of $10,000. If it deviates, AP can pick this up very well.

2. Analytical procedures are only useful if the information derived from are accurate. If it's not accurate, then analytical procedures are useless. So, unauthorized transactions does not apply with analytical procedures, it is better being addressed with why test of controls didn't pick up these unauthorized transactions (deviation/occurrence rate).

3. Noncompliance acts is whether complied with laws + regulations. It's either you complied with the laws + regulations or not. I do not see how analytical procedure would have any bearing on this.

Again, analytical procedures are not particularly useful on nonpredictable accounts because if the information being relied on is not TRUE, then it provides senseless meaning.

I hope this helps a little…

[Anonymous]

I am going to follow up with what derf is saying regarding analytic procedures. I thought Becker taught this material very well using the example of long term liabilities on the balance sheet. For example:

if your looking at a client's books and you see their Long Term Liabilities are on average 10,000 for the year and interest expense is 1,052 on the income statement that tells you something without testing the details or control testing. Also, after writing down these two numbers in your work-papers, you examine loan agreements that state an APR/interest rate of 10%. To you this is fabulous because the numbers make sense. Interest expense tends to be very predictable because there is always a fixed amount being charged every month unless more loans are added.

Non-discretionary accounts such as interest expense, and lease expense lend them self to analytic procedures due to their predictability. In contrast, an account such as Office Supplies Expense, or Travel Expense tend to be eradic and unpredictable.

This is a very EFFICIENT audit procedure because the information you get from it is convincing compared to the minimal time it took you to get it.

[Anonymous]

Thanks guys for your help. It's greatly appreciated!

[Author]

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