Final answer:
Comparing current earnings per share with the earnings per share of the client's primary competitor is the least useful analytical procedure in the context of an audit because it does not provide direct insight into possible misstatements within the client's financial statements.
Step-by-step explanation:
The question you've asked pertains to which analytical procedure is least useful in indicating whether further audit work is necessary before issuing an audit opinion. When auditors use analytical procedures, they are primarily interested in identifying significant or unusual trends or fluctuations that might indicate possible misstatements. Let's examine the options you provided:
- Developing a common-size analysis is useful as it helps to compare financial statements of different companies, irrespective of their size, by expressing items as a percentage of a common base.
- Analyzing the dollar and percentage changes in each income statement item over the previous year helps identify significant movements that could indicate errors or fraud.
- Comparing current earnings per share with earnings per share of the client's primary competitor is less useful in the context of an audit as it is a comparative metric with an external entity and it may not provide direct insight into potential misstatements within the client's financial statements.
- Developing a ratio analysis offers insight into the client's financial position, performance, and changes over time, which can flag areas requiring further investigation.
In conclusion, comparing current earnings per share with the earnings per share of the client's primary competitor is the least useful analytical procedure for the purpose of an audit, as it is a comparison with an external benchmark rather than an introspective analysis that can help identify specific issues that need to be addressed within the client's financial statements.