Reasonableness test
A reasonableness test is an analytical procedure that develops an independent expectation for an amount using relevant relationships, then compares it with the recorded amount. The auditor considers the precision of the expectation, reliability of inputs and any difference requiring investigation. It can be substantive if designed to provide sufficient appropriate evidence.
Worked example
For rent of 12,000 per month for 12 months, an auditor expects 144,000 and investigates a recorded expense of 132,000.
Common mistake
A plausible comparison alone does not establish that the data are reliable or the explanation for a significant difference is supported.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AA | Direct | September 2026–June 2027 |