Part I: Understanding the Audit Concept
After reading the case materials, please take a few minutes to read through the PCAOB’s
auditing standard governing the use of substantive analytical procedures. Refer to this standard
as you answer the following questions.
1. Paragraph .04 of the standard states the following: “Analytical procedures are used as a
substantive test to obtain evidential matter about particular assertions related to account balances
or classes of transactions. In some cases, analytical procedures can be more effective or efficient
than tests of details for achieving particular substantive testing objectives.”
What specific assertions related to the Ticket Sales Revenue account balance could a substantive
analytical procedure be used to test? Explain your reasoning fully.
Why do you think a substantive analytical procedure might be more effective and efficient than
tests of details for the Ticket Sales Revenue account?
2. Paragraph .14 of the standard suggests that “predictable relationships” are required to develop
a more precise and reliable expectation when higher levels of assurance are desired from a
substantive analytical procedure. Do you feel that the Ticket Sales Revenue account would
qualify as one having a “predictable relationship” among the underlying transaction data? Why
or why not?
3. Paragraphs .17 – .19 of the standard describe the importance of developing a “precise”
expectation. Paragraph .19 states that “expectations developed at a detailed level generally have
a greater chance of detecting misstatement of a given amount than do broad comparisons.”
As Stephen considers what data to request from Coliseum and from Trusted Tickets, what type of
disaggregation of data might help him generate more precise expectation?
4. Paragraph .16 of the standard prescribes that “the auditor should assess the reliability of the
data.” After reading the five specific criteria listed in this paragraph of the auditing standard,
briefly discuss your thoughts regarding the reliability of the data being used to perform the
5. In paragraph .22 of the standard, the PCAOB states that the auditor should document three
things. In your own words, briefly describe these three steps of documentation.
Part II: Performing the Audit Procedure
As part of the annual audit of Coliseum Entertainment’s 2015 financial statements, the
engagement audit partner has encouraged Stephen – a third-year associate auditor – to develop a
substantive analytical procedure to test Coliseum’s 2015 Ticket Sales Revenue account for the
Reel Wheel attraction.After carefully reviewing the standards Stephen approaches the appropriate personnel at
Coliseum and Trusted Tickets and requests data needed to create his data analytic. The attached
PDF files include the requested data related to ticket sales revenue generated by the Reel Wheel
Use the provided Excel file to create analytics showing your solutions to the questions in
Question 1. Use a separate tab to show your work in analyzing each question. You will find
slight revisions of the questions with the excel worksheet – they are very similar but perhaps the
ones in the excel file are more clear with hints.