[OneStepAwayCPA]

In testing LT investments, an auditor ordinarily would use analytical procedures to ascertain the reasonableness of the:

a. completeness of recorded investment income

b. classification between current and noncurrent portfolios

c. valuation of marketable equity securities

d. existence of unrealized gains or losses in the portfolio

Now analytical procedures is the comparison of plausible relationships, so i thought it would be B. answer is A. can someone explain this to me? thanks.

[kb24]

Analytical procedures usually use a numerical comparison. The classification of current versus noncurrent is just an evaluation as to dates. You can use an industry average or the company's previous year ratio to determine if the reported investment income is as high as would be expected. If not, the auditor would do further investigation to see why.

This is the type of thing they do with the exam, especially on AUD. When you first read the answers it may seem as if none of them are correct or an incorrect one appears right unless you carefully read every word.

FAR 4/1/11 - 89
AUD 4/15/11 - 85
REG 4/29/11 - 80
BEC 5/13/11 - 85

[Author]

Replies