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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Evidence and testing considerations

Kestrel Foods plc has a year-end of 31 December. In the final review stage of the audit, the audit senior proposes performing analytical procedures to help form an overall conclusion on the financial statements. Which statement is consistent with ISA 520?

Analytical procedures at the end of the audit are mandatory under ISA 520. They help the auditor form an overall conclusion on whether the financial statements are consistent with the auditor's understanding of the entity, and may reveal previously unrecognised risks of material misstatement.

  1. AAnalytical procedures near the end of the audit are optional and can be replaced by a management representation
  2. BAnalytical procedures near the end of the audit are required, and they help assess whether the financial statements are consistent with the auditor's understanding of the entityCorrect
  3. CAnalytical procedures near the end of the audit are used only to calculate final materiality
  4. DAnalytical procedures near the end of the audit must be performed only on balance sheet items

Explanation

ISA 520 requires the auditor to design and perform analytical procedures near the end of the audit that assist in forming an overall conclusion as to whether the financial statements are consistent with the auditor's understanding of the entity. They are mandatory, not optional, and are not limited to the balance sheet. A management representation cannot replace them.

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