Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

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Study for the Auditing and Attestation CPA Exam. Focus on key auditing concepts and attestation standards with multiple choice questions and detailed explanations. Boost your exam readiness today!

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What is the main purpose of performing analytical procedures during an audit?

To assess internal controls.
To evaluate management's discretion.
To identify relationships that may indicate risk.
To confirm compliance with regulations.

The correct answer is: To identify relationships that may indicate risk.

The main purpose of performing analytical procedures during an audit is to identify relationships that may indicate risk. Analytical procedures involve evaluating financial information by analyzing plausible relationships among both financial and non-financial data. These procedures help auditors develop expectations about account balances and identify any significant fluctuations or unexpected variances that could signal potential misstatements or areas of risk. By examining trends, ratios, and patterns in the financial data, auditors can highlight anomalies that warrant further investigation. This risk assessment is crucial in guiding the auditor’s approach and determining the nature and extent of further audit procedures. Ultimately, analytical procedures serve as a valuable tool in the auditor's arsenal for understanding the entity under audit and focusing attention on areas where there may be issues that require deeper examination.