Final answer:
Analytical procedures in auditing involve evaluating financial information through analysis of relationships among data and are not sufficient alone to support management assertions. They provide indirect evidence for assertions like completeness and should be used with other auditing methods.
Step-by-step explanation:
Analytical procedures in the context of auditing refer to the evaluations of financial information through analysis of plausible relationships among both financial and non-financial data. These procedures include activities like trend analysis, ratio analysis, and comparisons to industry standards. When discussing assertions made by management in the financial statements, there are several key points to consider:
- Analytical procedures are generally not sufficient by themselves to support management assertions; they are often used in conjunction with other auditing techniques.
- These procedures, while helpful, are not considered direct information but are rather an analysis of the indirect evidence available.
- For the completeness assertion, analytical procedures may indeed provide the best available information especially when direct physical counts or confirmations are not possible.
- Confirmation of receivables would typically involve more direct tests, such as actually confirming balances with customers, rather than the indirect analysis performed in analytical procedures.
The quality of an analytical report and the subsequent analysis relies significantly on the gathering information stages, which include researching, finding expert opinions, and possibly conducting interviews or surveys. It's also important to distinguish between facts, which can be verified and proven, and opinions, which are subjective. This distinction is crucial in auditing as the auditor must evaluate the evidence gathered to support or refute the assertions made by the management.