Analytical Procedures in Planning

I strongly recommend that you read a recent examiner’s report to see what the examiner expects here https://www.accaglobal.com/an/en/student/exam-support-resources/professional-exams-study-resources/p7/examiners-reports1.html

See here this post where I illustrative how to be effective in writing the evaluation of materiality and analytical procedures/ratios https://opentuition.com/topic/aaa-exam-2

In essence you want to look at the numbers you’re given – if something has “gone up”/”gone down” – ask yourself whether there could be over/understatement – you can’t assess this without looking at what has gone up/down in context. For example, if revenue has gone up and GP% has increased – revenue/GP% could be overstated if revenue is inflated (in some way) – i.e. does not have matching cost of sale. This could be due to error (cut-off on sales invoices) or fraud (fictitious invoices). If, however, the GP% has been maintained, the increase in revenue would look “bona fide” – rather than overstated.

It might help to imagine, in your head (not in your answer), that you are doing an “interps” Q from FR – only where something is not making clear business sense (e.g. sales/cos go up and GP margin is maintained because the co is selling more) that is where you are identifying potential misstatement).