Question

The use of analytical procedures _______.

1) is optional during risk assessment
2) is prohibited during risk assessment
3) is required during risk assessment
4) is most effective as part of the testing of the system of internal control

Answer 1

The use of analytical procedures is required during risk assessment to understand the client's business and assess risk. These procedures are more precise than graphical methods, which are limited by the drawing's precision.

Step-by-step explanation:

The use of analytical procedures is required during risk assessment. Analytical procedures are used by auditors to understand the client's business and to assess the risk of material misstatement in a financial statement. These procedures involve the analysis of the relationships and trends of financial and non-financial data. During the risk assessment process, auditors must use analytical procedures to help form a conclusion about the reasonableness of account balances and to identify any anomalies that might indicate a risk of material misstatement.

Accuracy of Analytical vs. Graphical Methods

When discussing analytical versus graphical methods, it is important to note that the analytical method is more accurate than the graphical method. This is because graphical methods are constrained by the precision of the drawing, whereas analytical methods leverage mathematical calculations that can provide more precise results. This concept is particularly relevant in fields such as physics or engineering, where the choice of a system greatly influences the problem-solving process and the understanding of the physics involved.