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Kindly please tell me the ratios to calculate and some guidance on priliminary annalytical procedures!! Thanks in advance 🙂
I also want to ask what will be the changes to our plan if a material function of client is outsoured and procedures 🙂
bilal – the ratios that are applicable are entirely dependent upon the scenario in the question.
Given that materiality is most frequently assessed by reference to revenue, profits and assets, the select those ratios that are relevant to those three measures.
Your examiner will effectively lead you to the ones relevant to your answer. The only danger for you (and it doesn’t lose marks – it just loses time) is that you calculate a ratio that is irrelevant for the item identified in the question as potentially needing adjustment
For example, you may calculate the value of an adjustment to be made in respect of a financial asset wrongly classified and compare that value with revenue. That would be a totally inappropriate base against which to measure
OK?
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