Question 1
The analytical procedures that were to be carried out were substantive analytical procedures. The risky area that requires further attention is the finished goods area after the insulated wires are completed.
Question 2
The risk that was obtained was at the finished goods area. This area is linked to the balance-related management assertion which is completeness. This, therefore, means that not all the business events which Laramie was subjected to were recorded.
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Question 3
An auditor is likely to adopt a client’s judgement frame in performing preliminary analytical procedures because evaluating issues and frames from different angles can aid the auditors to take in different perspectives. Considering a client’s frame can bring about different ways to understand an issue, thereby bringing about more options which were not considered at first instance. This can be illustrated by the following: suppose a company’s income has increased and has overcome most of its competition. The company then claims that the increase in revenue is because of a new marketing strategy. The auditor should be willing to understand the client and then apply professional methods by considering other options like a mistake in income recognition or even fraudulent financial statements (ACCA Global , 2016) .
There are two common judgment traps that come from this kind of a situation: a rush to solve and judgment triggers. Rush to solve refers to the occurrence whereby an auditor wants to obtain a solution quickly and ends up not carrying out the first step of judgement which is identifying the problem. Judgement triggers refer to alternatives which pretend to be problems. these alternatives push the auditors to fail to consider all the angles and end up not identifying the problem. The best method of avoiding judgement traps is through awareness, each auditor must be aware of rush to solve and judgement triggers.
References
ACCA Global . (2016). Analytical Procedures . Retrieved January 15, 2017, from ACCA Global: www.accaglobal.com/za/en/student/exam-support-resources/professional-exams-study-resources/p7/technical-articles/analytical-procedures.html .
