Auditing · Analytical Procedures
ISA 520 Analytical Procedures states that where analytical procedures identify fluctuations or relationships that are inconsistent with other relevant information or differ significantly from expected results, the auditor shall investigate the reasons. Which of the following responses to an unexpected increase in the client's receivables collection period is the LEAST relevant to investigating that specific fluctuation?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Perform further working capital ratio analysis to determine the effect of the extended credit on the company's cash position.
- 2Perform a trend analysis on current year and prior year monthly revenue to check overall turnover inflation rules.✓
- 3Perform detailed substantive testing on the aged receivables listing to determine whether any amounts should be written off.
- 4Make enquiries of management to understand the likely reason why the receivables collection period exceeds the credit period.
Correct answer
Perform a trend analysis on current year and prior year monthly revenue to check overall turnover inflation rules.
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