Which of the following statements is true regarding planning analytical procedures for debt and stockholders' equity transactions?
A)Trend analysis would not typically be performed for debt.
B)The long-term debt to equity ratio could be considered by the auditor as part of the planning analytical procedures.
C)Because there are typically only a few stockholders' equity transactions,the auditor is not required to perform planning analytical procedures for stockholders' equity accounts.
D)If unusual or unexpected relationships are identified by planning analytical procedures,the auditor should stick with the original expectations of misstatements,because this could be an anomaly and bias the audit overall.

Question

Quizplus · Accepted Answer

The long-term debt to equity ratio could be considered by the auditor as part of the planning analytical procedures. Trend analysis may be appropriate for both debt and equity accounts, and the auditor should investigate any unusual or unexpected relationships identified by planning analytical procedures. The auditor should not stick with the original expectations of misstatements if anomalies are identified, but rather should consider these potential areas of misstatement in the audit plan. There is no basis for the statement that planning analytical procedures are not required for stockholders' equity accounts.

Which of the Following Statements Is True Regarding Planning Analytical