IMPORTANCE OF REASONABLENESS TESTS AND RECOMMENDATIONS FOR ITS APPLICATIONS

Year 2017, , 39 - 42, 30.12.2017

Huseyin Mert Ece Bas Hasan Melih Eren

https://doi.org/10.17261/Pressacademia.2017.743

Abstract

Objective-
Analytical procedures have higher potential compared to test of details in
terms of analysing the account relationships, detecting significant risk of
misstatement, reducing audit fieldwork and testing management assertions. In
order to get benefit of those procedures, auditors should access more entity
specific resources and invest more time in planning the audit program. In this
study, reasonableness tests that are generally used in substantive analytical
procedures are analysed through industry examples and their role in reducing
the audit risk is demonstrated.

Methodology-
In this study, case study method is used as a research methodology. The reason
of selecting this methodology is due to its relevance in accordance with the
objective of the study as well as providing an opportunity to auditors that
would like to implement reasonableness tests.  

Findings-
This study reveals, through examples that can be used in practice, that the
management claims can be tested more soundly through rationality tests when
more time is given to the stages of understanding the enterprise and planning
the audit.

Conclusion-
Among the analytical review techniques, reasonableness test is highly
effective technique for testing the relationship between non-financial
information and financial information. In order to use the reasonableness tests
more frequently in the evidence collection, understanding the enterprise, more
senior and industry specific team construction and accessing the non-financial
information by inquiring also the performance indicators used by the enterprise
are important. Agreements for longer than a year between the auditor and the
company will reinforce the auditor's accumulated knowledge on the enterprise
that will increase number of reasonableness tests.

 

Keywords

Reasonableness Test, analytical procedures, independent audit, analytical review, risk of misstatement

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