ACCA Audit and Assurance (F8) Practice Exam

Which of the following is an example of an analytical procedure?

1. Reviewing supplier contracts

2. Comparing current year figures to prior year figures

3. Conducting interviews with employees

4. Analyzing transaction details

The correct answer is: Comparing current year figures to prior year figures

The choice that involves comparing current year figures to prior year figures is a classic example of an analytical procedure. Analytical procedures are generally used to evaluate financial information by studying plausible relationships among both financial and non-financial data. This approach often involves comparing figures over time to identify trends, variances, or significant changes that may warrant further investigation. By analyzing current year figures against prior year figures, the auditor can assess whether the financial outcomes make sense in the context of historical performance. Significant changes or unexpected variations can indicate potential issues or areas requiring further scrutiny in the audit process. This method is valuable for forming an overall understanding of the business and for risk assessment during the planning phase of an audit. In contrast, reviewing supplier contracts involves examining specific agreements rather than analyzing data trends. Conducting interviews with employees is more focused on gathering qualitative information rather than quantitative analysis. Analyzing transaction details also tends to be a more granular examination, assessing individual transactions rather than applying a broad analytical lens to financial figures over time. The analytical procedures inherently focus on relationships and comparative analysis, which makes the selected response the most appropriate example of such a procedure.