Lesson: Analytical & Other Procedures Summary

Instructor: Nick Palazzolo

This lesson focuses on the importance of understanding relationships between different financial accounts and transactions through the use of analytical procedures. It also covers how to differentiate between substantive and normal analytical procedures and when these are required in various engagements. Additionally, the lesson emphasizes the need to memorize and be familiar with various ratios and formulas, in order to better interpret and explain results, as well as understand the purposes and benefits of analytical procedures. With a thorough grasp of these concepts, learners will be well-prepared for tackling related questions on the CPA exam.

Updated: June 22, 2023 Create an account

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Analytical & Other Procedures Overview

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Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Another one down, we saw a lot of ratios, we saw a lot of items, which you'll see throughout many exams in the CPA exam process. These formulas, be quite familiar with them, make sure you understand what they represent. Make sure you understand if it's better or worse to have a higher or lower ratio compared to the industry, compared to competitors, understanding what is rational, what's logical, the relationships between the different accounts and transactions. If I can say one word, I'd say relationships is the most important for this lesson. The relationships between year-to-year financials, between different accounts, think journal entries, right? Gotta love those journal entries. I know, I love them, they never lie, trust the accounting system. With that being said, let's wrap it up with a nice summary. First off, we're going to want to be able to identify a certain procedure. If that is an analytical procedure, make sure you can just differentiate, right? You want to make sure you know the difference between a substantive procedure and just a normal analytical procedure. Next, we want to understand what types of engagements require the use of analytical procedures and how they require the use when you do them, just all the logistics of them overall. We want to memorize and be familiar with those ratios and the formulas provided. I'm not going to promise that they're going to be provided on the exam. It's ever-changing, right? You may see them on the exam, you may not, you may be given them. Don't trust that. Just do the work ahead of time, memorize the formulas, memorize the ratios, and even if they are given on the exam, you're going to be in a much better spot because you're going to know them so much

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