Question

Identify an example of substantive analytical procedures using ADA technique

a, Cash receipts to sales invoice matching procedures by comparing 100% of sales invoice to cash receipts for the entire year under audit and period subsequent to balance sheet data to verify occurrence of sales

b, comparison of 100% of cash disbursements activity to an approved master vender list to determine whether payments were made to vendors that had not been approved through the formal control procedures

c, Trend analysis of sales revenue showing quarterly sales over past four years and sales for each type of product to determine whether there are any unusual changes in sales from prior years or other trends that might affect risk of material misstatement

d, Predictive model to develop the auditor's expectation of rental revenue for each apartment building held by a real estate company based on apartment buildings number of units (by size), average monthly marketplace rental rate, and marketplace monthly vacancy rates

Answer 1

An example of substantive analytical procedures using ADA technique is a predictive model to develop the auditor's expectation of rental revenue for each apartment building based on various factors. Thus, D is correct option.

Step-by-step explanation:

An example of substantive analytical procedures using ADA technique is d, Predictive model to develop the auditor's expectation of rental revenue for each apartment building held by a real estate company based on apartment buildings number of units (by size), average monthly marketplace rental rate, and marketplace monthly vacancy rates. This technique involves using data analytics to predict the rental revenue for each apartment building by analyzing factors such as the number of units, rental rates, and vacancy rates. By using a predictive model, auditors can assess the reasonableness of the rental revenue reported by the company.

Answer 2

An example is d. Predictive model to develop the auditor's expectation of rental revenue for each apartment building held by a real estate company based on apartment buildings number of units (by size), average monthly marketplace rental rate, and marketplace monthly vacancy rates

Step-by-step explanation:

Substantive analytical procedures are audit techniques used to assess the reasonableness of financial information. These procedures involve evaluating relationships and trends within financial data, comparing current and prior periods, and investigating fluctuations. By analyzing key financial ratios, account balances, or other relevant metrics, auditors gain insights into the accuracy and integrity of financial statements, aiding in the detection of potential errors or fraud during the audit process.

An example of substantive analytical procedures using ADA technique is d, Predictive model to develop the auditor's expectation of rental revenue for each apartment building held by a real estate company based on apartment buildings number of units (by size), average monthly marketplace rental rate, and marketplace monthly vacancy rates.