AP9.5 (LO 3, 4) Persuasiveness of evidence from substantive analytical procedures Iman has the task of reviewing the evidence from substantive analytical procedures conducted by the audit associates on the audit of Smalley Services Inc. The audit associates have reported the results of these substantive analytical procedures:
1. 1. Comparison of depreciation expense with the closing balance of each depreciable asset class in property, plant, and equipment.
2. 2. Recalculation of sales commission expenses using the standard sales commission rate and total sales.
3. 3. Comparison of payroll expense with previous year payroll.
Required
Read and consider AP9.5 in the course text. Evaluate the results of the substantive analytical procedures and perform the following tasks:
1.
1. For each item, identify at least two review comments and discuss the persuasiveness of the evidence provided.
2. For each item, design two tests of details that would provide additional evidence.
3. For each item, discuss how ADA could be used as a risk assessment procedure or as a substantive test. Explain the evidence used to support an audit conclusion.
**Important note: This case analysis has a tendency to rattle some students because it asks you think a little outside the box (beyond what we normally think about in accounting courses). As a result, I have seen quite a few students cheat and submit work that is not theirs, including a particularly awful solution widely available on the internet (it’s not correct). I literally have a Spidey sense when it comes to rooting out cheating on this particular assignment, so PLEASE submit your own work! I am looking for an explanation of your thought process on this assignment, not just checking for a right or wrong answer. If you support your conclusions, you will be good to go.
