Question

If an auditor performs analytical procedures on rent expense and finds that rent expense has increased 50%, he or she is most likely to perform which of the following additional procedures?

a) Confirmations with Landlord
b) Bank Reconciliation
c) Substantive Analytical Procedures
d) Review of Internal Controls

Answer 1

If an auditor performs analytical procedures on rent expense and finds that rent expense has increased 50%, then he or she is most likely to perform additional substantive analytical procedures.

Step-by-step explanation:

If an auditor performs analytical procedures on rent expense and finds that rent expense has increased 50%, then he or she is most likely to perform additional substantive analytical procedures.

The purpose of substantive analytical procedures is to obtain audit evidence about the plausibility of account balances and transactions. In this case, the significant increase in rent expense indicates a potential risk or misstatement, so the auditor would need to perform further substantive analytical procedures to investigate and gather additional evidence.

The auditor might analyze other related accounts or transactions, such as lease agreements, occupancy rates, or changes in the company's operations or strategy that could explain the increase. They may also compare the current year's rent expense to previous years or industry benchmarks to determine if the increase is reasonable.