Group 11: Analytical Procedures

30 original descriptive cases. Descriptive mix: 7 at 3 marks, 17 at 5 marks, 6 at 10 marks.

Original practice, not ICAI questions, official suggested answers or an official examiner scheme. Equivalent correct work is credited within the stated caps. Public practice availability is not full official question-bank completion.

Supplied numerical assumptions and limits are exercise facts, not statutory thresholds. Source boundary: module4 groups confirmation/reconciliation examples under analytical-purpose discussion; direct confirmation is not automatically analytics under SA520 paragraph4.

AUD-G11-D001 · 3 marks

A confirmation is not automatically an analytical procedure The auditor receives a debtor balance confirmation and separately compares revenue to independently supported units sold and contract prices. The junior labels both analytical solely because each helps judge the accounts. Required: Classify the two procedures and state the analytical investigation boundary. (3 marks)

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Marks	Credit	Case application / answer
1	Analytical procedures evaluate plausible financial/non-financial relationships.	Revenue related to supported units and prices is an analytical evaluation when the relationship is actually assessed.
1	A direct confirmation is a distinct evidence procedure.	Receipt of a balance confirmation is not automatically analytics; a separate plausible-relationship evaluation would need its own basis.
1	Analytics include necessary investigation of inconsistent relationships or significant differences.	A comparison is not finished merely because a ratio or expectation was calculated.

Non-credit errors

Do not convert every evidence procedure into analytics.

Official ICAI concept source, SA 520 paragraphs 4/7/A1-A3

AUD-G11-D002 · 5 marks

Three uses, not one substitute An audit file uses revenue trends while understanding the entity, a supported expense model at assertion level, and a near-end review of statement consistency. The trainee says the early trend means the near-end procedure is optional and SA520 governs every risk-assessment requirement. Required: Explain the three purposes and two scope limits. (5 marks)

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Marks	Credit	Case application / answer
1	Risk-assessment use is dealt with in SA315.	An early trend helps understanding/risk assessment; SA520 paragraph1 identifies the separate standard boundary.
1	Substantive analytics aim to obtain relevant reliable evidence at assertion level.	The expense model must satisfy suitability/reliability/precision/difference requirements, not just look sensible.
1	Near-end analytics assist an overall consistency conclusion.	Design and perform them near the end under paragraph6.
1	An early procedure does not automatically discharge the later objective.	Timing, updated information and purpose differ; do not call the near-end requirement optional.
1	An overall review does not replace every assertion-level substantive response.	Each procedure must meet its actual objective; neither early trends nor a final overview guarantee all misstatements detected.

Non-credit errors

No planning-trend exemption from near-end review.

Official ICAI concept source, SA 520 paragraphs 1/3/5-6/A17-A19

AUD-G11-D003 · 5 marks

Sales changed, the old margin model did not Last year the entity sold one stable product. This year it has new services, volatile prices and a large change in mix. The team applies last-year gross margin to all current revenue as its sole substantive evidence. Required: Evaluate suitability, assertion/risk, model relationship, detail work and evidence limits. (5 marks)

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Marks	Credit	Case application / answer
1	Determine suitability for the given assertion.	A historical margin may not detect current revenue/cost misstatement adequately after this business change.
1	Take assessed risk and other detail tests into account.	Do not choose sole analytics because quick; consider required persuasive evidence and planned procedures.
1	Reassess whether the plausible relationship continues.	New services/prices/mix are known contrary conditions to unchanged-margin prediction.
1	Consider a refined model and/or appropriate tests of details.	Use reliable separated data where suitable rather than blindly retain a broad model.
1	Different analytics provide different persuasive strength.	A margin comparison may corroborate other work without being sufficient sole evidence for the supplied circumstances.

Non-credit errors

No historical ratio necessarily remains a precise current model.

Official ICAI concept source, SA 520 paragraphs 5(a)/A6/A8-A10

AUD-G11-D004 · 5 marks

A target budget becomes the expectation Management supplies a sales budget designed as an ambitious target. It was edited after year-end to match actual totals and has no reliable preparation controls. The auditor calls it independent expected-results evidence. Required: Apply source, comparability, nature/relevance, controls and response. (5 marks)

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Marks	Credit	Case application / answer
1	Evaluate source and circumstances.	Management data is not inherently unusable, but it is not independent simply because headed budget.
1	Evaluate comparability with the actual period/business.	Check that the information concerns comparable scope/products and timing, not an unrelated benchmark.
1	Distinguish expected results from goals to achieve.	An aspirational target is not automatically a sound predictive expectation.
1	Evaluate controls over preparation and reliability.	Post-year-end matching edits and missing controls undermine the independent expectation; consider appropriate evidence/testing.
1	Use an adequately supported expectation or alternative procedures.	Agreement with actuals after editing is not persuasive substantive evidence; do not conclude no misstatement from that agreement.

Non-credit errors

No edited-to-actual budget creates independent corroboration.

Official ICAI concept source, SA 520 paragraphs 5(b)/A5/A12-A14

AUD-G11-D005 · 10 marks

Payroll expectation with two stable groups For this exercise, reliable independently checked data show 24 employees at Rs 30,000 monthly throughout the year and 6 additional employees at Rs 25,000 monthly for exactly the final four months. No bonuses, overtime or other payroll elements apply. Recorded expense is Rs 95 lakh. The exercise supplies an acceptable difference of Rs 1 lakh, not a statutory threshold. Required: Calculate each group and total expectation, compare actuals, apply the supplied limit, explain reliability/precision and design investigation without declaring fraud. (10 marks)

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Marks	Credit	Case application / answer
1	Calculate first-group annual cost.	24 x Rs 30,000 x 12 = Rs 86.4 lakh.
1	Calculate second-group cost for actual employment period.	6 x Rs 25,000 x 4 = Rs 6 lakh, not twelve months.
1	Combine only supplied components.	Expected payroll = Rs 92.4 lakh; no invented bonus or extra rate.
1	Calculate recorded-versus-expected difference.	Rs 95 lakh - Rs 92.4 lakh = Rs 2.6 lakh recorded above expectation.
1	Apply supplied acceptable difference.	Rs 2.6 lakh exceeds Rs 1 lakh and requires investigation in this exercise; it is not a universal legal tolerance.
1	Evaluate suitability of the stable rate/headcount relationship.	The supplied fixed pay and exact periods support a predictable model for the relevant payroll assertion.
1	Evaluate input reliability and scope completeness.	Independently checked data and explicit no-other-elements assumptions support this model; actual engagements require those facts verified.
1	Evaluate sufficient precision and aggregation context.	The expectation must identify potentially material individual/aggregated misstatements; arithmetic agreement alone would not prove every payroll assertion.
1	Inquire of management and obtain evidence relevant to the explanation.	Ask about the Rs 2.6 lakh gap and corroborate actual explanations rather than accept a verbal label.
1	Perform other procedures as necessary and evaluate results.	Inspect relevant supported payroll records where needed; the difference is not automatically fraud, a final adjustment or a particular opinion.

Non-credit errors

No difference alone establishes fraud or a mandatory adjustment.

Official ICAI concept source, SA 520 paragraphs 5/7/A6-A7/A12/A15-A16/A20-A21

AUD-G11-D006 · 5 marks

An exact sum, an imprecise expectation A model produces a perfectly calculated estimate of discretionary advertising based only on last-year expense. Spending strategy changed and monthly information is available. The auditor says correct arithmetic proves precision. Required: Explain predictability, detail, information, reliability and detection precision. (5 marks)

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Marks	Credit	Case application / answer
1	Arithmetic correctness differs from predictive accuracy.	A correct sum can still estimate the wrong amount when strategy changed.
1	Consider whether results can be accurately predicted.	Discretionary advertising may be less consistent than a stable recurring relationship.
1	Consider disaggregation.	Monthly/campaign analysis may expose differences hidden by a single annual comparison.
1	Consider available information and its reliability.	Use supported financial/non-financial information where relevant rather than assume every available schedule reliable.
1	Assess precision relative to possible material individual/aggregated misstatement.	The model must be capable of identifying relevant misstatement; a broad uncertain estimate is not cured by exact arithmetic.

Non-credit errors

No correct arithmetic equals adequate expectation precision.

Official ICAI concept source, SA 520 paragraphs 5(c)/A15

AUD-G11-D007 · 3 marks

Higher risk, wider tolerance? After new evidence increases assessed risk, the team widens the acceptable unexplained difference solely to avoid extra work. No changed materiality or better model supports the decision. Required: Explain risk, materiality/aggregation and the workload argument. (3 marks)

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Marks	Credit	Case application / answer
1	Higher assessed risk calls for more persuasive evidence.	A16 indicates acceptable difference decreases as risk increases for the desired assurance, not expands simply for convenience.
1	Consider materiality and aggregation with other misstatements.	A difference cannot be judged solely against its own isolated size.
1	Set a supported acceptable difference, not a workload target.	No supplied facts justify widening it; investigate differences under the actual supported criterion.

Non-credit errors

No convenience-based tolerance increase.

Official ICAI concept source, SA 520 paragraphs 5(d)/A16

AUD-G11-D008 · 5 marks

Management explains a fall in margin The analytical procedure finds a significant margin fall inconsistent with supported information. Management says a promotion caused it but gives no records. The auditor stops after the explanation. Required: Explain investigation trigger, inquiry, corroboration, other work and conclusion limit. (5 marks)

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Marks	Credit	Case application / answer
1	Investigate the significant inconsistency.	The margin movement is not closed merely because management gives a possible cause.
1	Inquire of management about the actual explanation.	Clarify promotion period/products/pricing and whether it accounts for the observed movement.
1	Obtain appropriate audit evidence relevant to the response.	Corroborate with supported promotion/pricing/sales information and other audit evidence.
1	Perform other procedures as necessary if explanation/evidence inadequate.	Absent adequate support, extend relevant work rather than accept the narrative.
1	Evaluate findings without assuming wrongdoing.	Promotion, error and other causes require evidence; the fall does not itself prove pilferage or a required report modification.

Non-credit errors

No inquiry-only closure or automatic fraud inference.

Official ICAI concept source, SA 520 paragraphs 7/A20-A21

AUD-G11-D009 · 5 marks

Overall review reveals a new issue Near the end, statement-level analytics reveal an unexpected receivable/revenue relationship not previously recognised. The team says the file is already final and overall review only confirms earlier conclusions. Required: Explain review purpose, new risk, reassessment, further work and overall conclusion. (5 marks)

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Marks	Credit	Case application / answer
1	Near-end analytics assist statement consistency assessment.	Compare the final information with the auditor understanding, not only repeat the early trend.
1	The review can identify a previously unrecognised risk.	The new relationship is not dismissed because work is nearly finished.
1	Revise risk assessment where required.	SA520 A18 points to SA315 response to the newly identified risk.
1	Modify further planned procedures accordingly and investigate relevant inconsistencies.	Obtain appropriate evidence; a final-stage label does not remove further work needs.
1	Use evaluated results to corroborate/support the overall conclusion.	Do not sign off automatically, and do not infer a particular opinion solely from an unexpected ratio.

Non-credit errors

No final-stage exemption from new risk response.

Official ICAI concept source, SA 520 paragraphs 6-7/A17-A19

AUD-G11-D010 · 10 marks

Occupancy model with a significant unexplained gap For this exercise, independently checked records show 10 rentable apartments, fixed rent Rs 20,000 per occupied apartment-month and 90 occupied apartment-months during the year. No concessions, variable charges or other rental elements apply. Recorded rental income is Rs 19.2 lakh. The supplied acceptable difference is Rs 0.5 lakh. Management attributes all of the gap to "normal vacancies" even though occupied months already reflect vacancies. Required: Calculate capacity, vacancy and income expectation, assess the difference, explain model evidence and investigate the explanation. (10 marks)

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Marks	Credit	Case application / answer
1	Calculate full annual capacity.	10 apartments x 12 =120 apartment-months.
1	Calculate vacant months.	120-90=30 vacant apartment-months; do not subtract vacancy twice.
1	Calculate rental expectation using occupied months.	90 x Rs 20,000 = Rs 18 lakh under the supplied assumptions.
1	Calculate recorded-minus-expected difference.	Rs 19.2 lakh-Rs 18 lakh = Rs 1.2 lakh above expectation.
1	Apply the supplied investigation limit.	Rs 1.2 lakh exceeds Rs 0.5 lakh; this exercise limit is not a universal rule.
1	Assess procedure suitability for the relevant rental assertion.	Fixed rates/verified occupancy support a predictable relationship; do not extend it automatically to all property rights assertions.
1	Evaluate reliability of occupancy and rate inputs.	The supplied independent checks matter; actual work must establish completeness/accuracy and applicable terms.
1	Evaluate precision and absent-component assumptions.	No concessions/other elements are supplied; do not invent a balancing fee or assume arithmetic alone proves the data.
1	Challenge the vacancy explanation and obtain relevant evidence.	Vacancy is already reflected in 90 occupied months, so it does not by itself explain higher recorded income; inquire and corroborate actual sources of the gap.
1	Perform other procedures as needed and conclude from evidence.	Inspect appropriate lease/receipt/recording information if needed; do not force a fraud conclusion or automatic adjustment solely from the model.

Non-credit errors

No double vacancy deduction or invented balancing charge.

Official ICAI concept source, SA 520 paragraphs 5/7/A8/A12/A15-A16/A20-A21

AUD-G11-D011 · 5 marks

The industry average is for a different business A specialised manufacturer is compared with a broad retail-industry margin. The external publication is reputable, but business models, products and accounting periods differ. The auditor treats independence of source as sufficient comparability. Required: Explain source, comparability, relevance, supplementation and conclusion limits. (5 marks)

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Marks	Credit	Case application / answer
1	Source is one reliability factor, not the entire evaluation.	A reputable external source does not make a retail benchmark comparable to this manufacturer.
1	Evaluate business/product comparability.	Retail mix and specialised production may create different expected margins without error.
1	Evaluate information nature, relevance and period.	Different accounting periods or definitions can distort the comparison.
1	Supplement or adjust broad information where supportable, or choose a better expectation.	Use supported comparable data, not an invented adjustment merely to force agreement.
1	Investigate supported inconsistencies without assuming benchmark difference is misstatement.	The comparison needs contextual evaluation; external status alone is neither proof of error nor sole substantive sufficiency.

Non-credit errors

No independent source automatically means comparable.

Official ICAI concept source, SA 520 paragraphs 5(b)/A12(a)-(c)

AUD-G11-D012 · 5 marks

Branches offset in the group total A diversified group shows an unchanged overall margin. One branch margin rises sharply and another falls. Reliable branch-level data are available. The auditor proposes ignoring the branch movements because the net movement is zero. Required: Apply disaggregation, precision, relationships, investigation and the aggregation limit. (5 marks)

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Marks	Credit	Case application / answer
1	Consider disaggregation when evaluating precision.	Branch-level analysis may identify differences hidden by group totals.
1	Evaluate whether branch relationships are predictable and comparable.	Different businesses may need different expectations, not one uniform margin.
1	Use reliable available component data.	Availability does not alone prove data quality; the supplied reliability supports separated evaluation.
1	Investigate significant inconsistent branch movements with relevant evidence.	Inquire and corroborate responses and perform other necessary work, not just accept the net zero.
1	No net change guarantees no misstatement.	Offsetting effects may mask separate issues; assess actual causes and aggregation, not automatic cancellation.

Non-credit errors

No unchanged consolidated ratio proves all branches sound.

Official ICAI concept source, SA 520 paragraphs 5(c)/7/A15

AUD-G11-D013 · 5 marks

Accurate invoices, doubtful units A sales model uses unit counts from a system whose non-financial-data controls were never evaluated. Invoice amounts were tested, but the unit-count field includes cancelled orders. The team assumes audited money totals validate every non-financial input. Required: Explain source-data reliability, controls, cancelled orders, alternative evidence and scope. (5 marks)

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Marks	Credit	Case application / answer
1	Evaluate reliability of non-financial inputs as well as amounts.	Invoice tests do not automatically validate the recorded unit population.
1	Consider controls over completeness, accuracy and validity of units.	Relevant unit controls may be tested with related financial controls where appropriate, but the work must actually cover them.
1	Correctly define the model input.	Cancelled orders are not necessarily completed unit sales; reconcile the supplied count to the intended relationship.
1	Consider audit-tested information or other relevant validation.	Use supported unit evidence or revise procedures rather than silently rely on an unexamined field.
1	Reassess the expectation/results after data issues are addressed.	A numerical match based on contaminated units is not independent persuasive corroboration.

Non-credit errors

No financial-total testing automatically validates all units.

Official ICAI concept source, SA 520 paragraphs 5(b)/A12(d)-A14

AUD-G11-D014 · 3 marks

A good model with unavailable data The auditor proposes a volume-price prediction, but reliable volume information is unavailable and no supported substitute is found. The spreadsheet contains a guessed quantity selected to match actual revenue. Required: Explain availability, reliability and alternative response. (3 marks)

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Marks	Credit	Case application / answer
1	Information availability affects achievable precision.	The proposed relationship cannot be applied credibly without the relevant volume input.
1	A fitted guess is not reliable independent expectation data.	Matching actuals by choosing a quantity creates circular support.
1	Revise the analytical approach or perform appropriate other procedures.	Do not declare the assertion supported by the unsupported match; select evidence responsive to the actual risk/assertion.

Non-credit errors

No actual-fitted guess supplies independent volume evidence.

Official ICAI concept source, SA 520 paragraphs 5(b)-(c)/A15

AUD-G11-D015 · 10 marks

Two product margins, one misleading total Under this exercise supplied assumptions, reliable revenue is Rs 60 lakh for Product A and Rs 40 lakh for Product B. Supported expected gross margins are respectively 30% and 10%. Actual reported gross profit is Rs 21 lakh. A junior applies a simple unweighted 20% margin to all sales. The exercise supplied acceptable difference is Rs 1 lakh, and differences above it require investigation. No other products apply. Required: Calculate expected profit by product, aggregate margin and the junior error; compare actuals, apply the supplied limit and explain evidence-backed investigation. (10 marks)

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Marks	Credit	Case application / answer
1	Calculate expected profit for A.	Rs 60 lakh x 30% = Rs 18 lakh.
1	Calculate expected profit for B.	Rs 40 lakh x 10% = Rs 4 lakh.
1	Combine product expectations.	Total expected gross profit = Rs 22 lakh.
1	Calculate the weighted total margin.	Rs 22 lakh / Rs 100 lakh =22%, not an unweighted 20%.
1	Identify junior model error.	20% x Rs 100 lakh gives Rs 20 lakh, understating the supported expectation by Rs 2 lakh.
1	Compare actual with the correct expectation.	Actual Rs 21 lakh is Rs 1 lakh below Rs 22 lakh expectation.
1	Apply only the supplied threshold wording.	The difference equals Rs 1 lakh, not above it; that specific rule does not by itself trigger investigation, but other inconsistent evidence can still require work.
1	Evaluate reliability and comparability of product expectations.	Supplied supported product margins/revenue make the weighted model meaningful; actual engagements must establish those conditions.
1	Assess precision and other misstatement/aggregation context.	Do not infer all assertions correct simply because the difference is at a supplied acceptable amount.
1	Investigate inconsistencies as necessary with evidence.	If other facts indicate inconsistency, inquire, corroborate and perform necessary work; do not change the threshold after seeing results or invent fraud.

Non-credit errors

No unweighted average for unequal sales weights; threshold not statutory.

Official ICAI concept source, SA 520 paragraphs 5(b)-(d)/7/A12/A15-A16

AUD-G11-D016 · 5 marks

Interim data do not cover the final quarter The auditor performed substantive analytics for nine months using reliable inputs. Production rates and prices change in the final quarter. The team rolls the nine-month ratio through the remaining period without new information. Required: Explain period coverage, data reliability, changed relationship, updated expectation and response. (5 marks)

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Marks	Credit	Case application / answer
1	Interim work is not evidence that remaining-period analytics were performed.	Identify the final-quarter coverage gap rather than relabel nine months as a full year.
1	Reliability considerations apply to interim and remaining-period analytics.	Validate relevant current inputs, not only the earlier schedule.
1	Known production/price changes may break the old relationship.	Do not blindly extrapolate the earlier ratio.
1	Develop a supported sufficiently precise expectation for the remaining period.	Use current relevant financial/non-financial data where suitable.
1	Perform appropriate remaining-period procedures under relevant requirements.	SA520 A14 refers to SA330 interim follow-up; analytic response depends on actual risk/evidence, not automatic roll-forward or a guessed statutory deadline.

Non-credit errors

No reliable interim model proves unexamined remaining period.

Official ICAI concept source, SA 520 paragraphs 5/A6/A14

AUD-G11-D017 · 5 marks

A public service is not a retail business A public-sector road programme has no direct sales/expenditure relationship and no comparable retail-industry ratios. Reliable road-length and cost information is available, but the team imports a retailer sales margin as its expectation. Required: Explain relevance, alternative relationship, comparability, reliability and investigation limits. (5 marks)

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Marks	Credit	Case application / answer
1	Traditional commercial relationships may be irrelevant here.	No direct sales/expenditure link is supplied; a retail margin does not become suitable merely because familiar.
1	Consider a relevant supported non-financial relationship.	Cost per kilometre may be useful where project conditions make comparison plausible.
1	Check comparability of projects/conditions.	Terrain, scope and timing differences need supported consideration; do not invent a uniform cost standard.
1	Evaluate the financial/non-financial data reliability.	Reliable cost and length inputs support evaluation but not every project assertion.
1	Investigate significant inconsistent relationships appropriately.	Evidence-backed explanations/other procedures are needed where triggered; a high cost ratio alone does not prove corruption.

Non-credit errors

No unrelated retail benchmark or automatic corruption finding.

Official ICAI concept source, SA 520 paragraphs 5(a)-(b)/7/A11-A12

AUD-G11-D018 · 3 marks

Simple is not automatically weak A supported, stable recurring expense model is simple. A second model uses sophisticated statistics but unreliable inputs. The reviewer chooses the second only because the technique is more complex. Required: Explain method, evidence and suitability. (3 marks)

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Marks	Credit	Case application / answer
1	Analytical methods range from simple comparisons to complex analysis.	Complexity alone is not an assurance ranking.
1	Evaluate reliable inputs and sufficient precision.	An advanced technique does not repair unreliable source data.
1	Choose procedure suitable for the assertion/risk and expected effectiveness.	The simple supported stable model may be useful; do not infer sufficient evidence solely from either label.

Non-credit errors

No advanced-method label guarantees better evidence.

Official ICAI concept source, SA 520 paragraphs 5/A3-A8

AUD-G11-D019 · 5 marks

Collectability needs more than the ageing shape The auditor uses a reliable receivable ageing analysis for valuation and also tests subsequent receipts. A manager asks the team to discard receipt tests because the ageing ratio appears normal. Required: Explain combination, assertion, normality limit, reliability and response. (5 marks)

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Marks	Credit	Case application / answer
1	Analytics may be combined with tests of details on the same assertion.	SA520 A10 expressly illustrates ageing with subsequent receipts.
1	Assess relevance to valuation/collectability.	A normal ageing shape does not itself demonstrate each debtor recoverable.
1	Do not replace planned evidence solely because a broad ratio looks normal.	Evaluate sufficiency against assessed risk and other findings before changing work.
1	Maintain data reliability and precision evaluation.	Reliable ageing helps but still needs a suitable expectation and meaningful investigation criterion.
1	Investigate inconsistent evidence and obtain necessary support.	Contrary receipt evidence cannot be ignored to preserve the normal ratio; no automatic allowance amount follows from this case.

Non-credit errors

No normal ageing ratio automatically replaces collectability detail evidence.

Official ICAI concept source, SA 520 paragraphs 5/7/A10/A12/A15

AUD-G11-D020 · 10 marks

Production energy model with a rate change For this exercise, verified production is 8,000 units in each half-year. Energy use is reliably established at 5 kWh per unit, with no idle/base charges or other components. Rates are Rs 6 per kWh for the first half and Rs 8 for the second. Actual recorded expense is Rs 5.9 lakh. The supplied acceptable unexplained difference is Rs 0.2 lakh. Management says the rate increase explains all difference from the model. Required: Compute each half, full expectation and incorrect constant-rate expectation; assess the gap and evidence/investigation. (10 marks)

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Marks	Credit	Case application / answer
1	Calculate first-half consumption.	8,000 x 5 =40,000 kWh.
1	Calculate first-half cost.	40,000 x Rs 6 = Rs 2.4 lakh.
1	Calculate second-half cost.	8,000 x 5 x Rs 8 = Rs 3.2 lakh.
1	Combine the correctly segmented expectation.	Expected expense = Rs 5.6 lakh.
1	Identify error in using the old rate all year.	16,000 x 5 x Rs 6 = Rs 4.8 lakh; it omits Rs 0.8 lakh rate effect already included in the correct model.
1	Calculate actual gap from correct expectation.	Rs 5.9 lakh-Rs 5.6 lakh = Rs 0.3 lakh above expectation.
1	Apply supplied investigation limit.	Rs 0.3 lakh exceeds Rs 0.2 lakh; no universal legal threshold is established.
1	Evaluate input reliability, precision and model conditions.	Verified volume/intensity/rates and explicit no-other-components assumptions support this prediction; actual work must substantiate them.
1	Challenge the explanation with the correctly changed-rate model.	The rate increase is already included, so it does not alone explain the residual Rs 0.3 lakh; obtain appropriate evidence for actual causes.
1	Perform other necessary work and evaluate the conclusion.	Inspect supported usage/billing/recording evidence as needed; do not invent a balancing charge, misstatement or fraud conclusion.

Non-credit errors

No old-rate comparison or already-modelled rate effect closes residual difference.

Official ICAI concept source, SA 520 paragraphs 5/7/A6/A12/A15-A16/A20-A21

AUD-G11-D021 · 5 marks

The expectation copies the recorded amount A revenue expectation multiplies quantity and price fields derived by dividing the recorded revenue itself. No separate reliable quantity or price evidence is used. The model always agrees exactly with the ledger. Required: Explain circularity, input evidence, apparent precision, alternative work and conclusion. (5 marks)

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Marks	Credit	Case application / answer
1	A plausible model requires a meaningful supported relationship.	Deriving both model inputs from the tested amount produces circular agreement rather than independent corroboration.
1	Evaluate source-data reliability and relevance.	Obtain appropriate evidence for genuine quantities/prices or other relevant inputs, not algebraic restatement of revenue.
1	Exact mathematical agreement is not predictive precision.	The model cannot detect the tested amount being wrong when it necessarily reproduces it.
1	Develop a suitable supported expectation or use appropriate alternative procedures.	Do not force an analytical model where inputs cannot support its objective.
1	Do not conclude the assertion proved from the constructed match.	Assess evidence sufficiency against the actual assertion/risk; no automatic fraud inference follows from the flawed method.

Non-credit errors

No algebraic restatement creates independent evidence.

Official ICAI concept source, SA 520 paragraphs 5(a)-(c)/A6/A12/A15

AUD-G11-D022 · 3 marks

No explanation, no closure A significant inconsistent fluctuation is identified. Management cannot explain it. The auditor documents "unexplained" and treats that label as the completed investigation. Required: Explain inquiry, further procedures and conclusion limit. (3 marks)

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Marks	Credit	Case application / answer
1	Inquiry is part of investigation, not the whole response when inadequate.	Management inability to explain does not make the inconsistency irrelevant.
1	Perform other audit procedures as necessary.	Obtain relevant evidence to investigate the actual fluctuation instead of only recording a label.
1	Evaluate the results before concluding.	Unexplained is not proof of fraud or a completed evidence objective; assess actual evidence implications.

Non-credit errors

No unexplained label closes a significant inconsistency.

Official ICAI concept source, SA 520 paragraphs 7/A20-A21

AUD-G11-D023 · 3 marks

A ratio cannot prove ownership A revenue analytics model has reliable data and a precise supported expectation. The team says its result also proves legal ownership of a property because the property earns that revenue. Required: Explain assertion suitability and the necessary evidence boundary. (3 marks)

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Marks	Credit	Case application / answer
1	Determine suitability for the specific assertion.	Evidence on predictable revenue does not automatically address legal rights to the property.
1	Reliable precise inputs do not remove relevance requirements.	Even a good revenue model may not be persuasive ownership evidence.
1	Obtain appropriate evidence for rights through suitable procedures.	Do not count all assertion objectives as complete from one model or infer the property necessarily owned by the entity.

Non-credit errors

No revenue-model success proves property ownership.

Official ICAI concept source, SA 520 paragraphs 5(a)/A9

AUD-G11-D024 · 5 marks

A supplied limit is rewritten after the result Before work, the auditor determines a supported acceptable difference. Actual results exceed it. The team raises the limit solely until the difference falls below it, with no new model, risk or materiality evidence. Required: Explain criterion, hindsight, risk/materiality, investigation and revised judgment limits. (5 marks)

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Marks	Credit	Case application / answer
1	Determine an acceptable difference on a supported basis.	The amount reflects materiality/desired assurance, not a target to make this observed result pass.
1	Do not substitute result-fitted tolerance for evidence-backed judgment.	Raising the limit just to avoid the identified gap undermines the planned procedure.
1	Consider risk and possible aggregated misstatement.	A single convenient comparison does not override evidence needs and other possible misstatements.
1	Investigate the gap under the actual supported criterion.	Inquire, obtain evidence relevant to explanations and perform necessary other work.
1	Revisions require substantive reasons and an adequate response.	Real changed facts can warrant judgment changes; none are supplied here. No automatic adjustment or fraud conclusion is established.

Non-credit errors

No result-fitted acceptable difference.

Official ICAI concept source, SA 520 paragraphs 5(d)/7/A16

AUD-G11-D025 · 5 marks

Two definitions of gross margin The entity margin is calculated after a category of production overhead, while an otherwise comparable benchmark excludes it. The team compares the percentages without reconciling definitions and calls the gap a sales error. Required: Explain definition comparability, relevance, reconciliation, precision and conclusion. (5 marks)

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Marks	Credit	Case application / answer
1	Compare like definitions of the ratio.	The numerator cost scope differs, so raw percentages are not directly comparable.
1	Evaluate benchmark nature and relevance.	Comparable business alone does not remove an accounting-measure definition mismatch.
1	Reconcile or supplement definitions where supported.	Use actual overhead information to build a comparable basis rather than invent a balancing adjustment.
1	Develop a meaningful sufficiently precise expectation.	A structurally mismatched ratio may not identify sales misstatement reliably.
1	Investigate supported remaining inconsistencies without preselecting the cause.	The gap does not by itself establish a sales error; cost definition and other causes need evidence.

Non-credit errors

No raw ratio gap automatically establishes sales error.

Official ICAI concept source, SA 520 paragraphs 5(b)-(c)/7/A12(b)-(c)/A15

AUD-G11-D026 · 3 marks

Detail testing is not always mandatory after every model A reliable, sufficiently precise predictable income model uses appropriately verified elements and meets the assertion/risk objective. The reviewer says analytics can never provide persuasive substantive evidence without identical duplicate detail testing. Required: Explain possible strength, conditions and the no-guarantee limit. (3 marks)

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Marks	Credit	Case application / answer
1	Some well-supported models can provide persuasive evidence.	SA520 A8 permits a suitable verified predictive model potentially to eliminate further detail verification.
1	The conclusion depends on assertion, risk and verified reliable precise elements.	It is not a universal rule that every model replaces detail work.
1	Assess actual sufficiency and any inconsistency requiring work.	Neither automatic duplicate detail tests nor an all-assertion guarantee follows from the model label.

Non-credit errors

No never-sufficient or always-sufficient analytics rule.

Official ICAI concept source, SA 520 paragraphs 5/A4/A8-A9

AUD-G11-D027 · 5 marks

Trend dates do not align Current-year revenue covers twelve months, but the comparative dataset covers nine months and a different seasonal mix. The team calls the percentage movement a like-for-like annual trend. Required: Explain period comparability, seasonality, evidence, expectation and investigation. (5 marks)

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Marks	Credit	Case application / answer
1	Check period coverage before comparing.	Twelve-month versus nine-month amounts are not automatically a like-for-like annual trend.
1	Consider seasonality and scope differences.	Simple scaling can be misleading where the missing months have different demand.
1	Obtain reliable relevant comparable information.	Use actual appropriate periods or supported adjustments, not invented missing-month sales.
1	Develop a sufficiently precise expectation for the objective.	A rough annualisation may help exploration without being suitable sole substantive evidence.
1	Investigate meaningful residual inconsistency with evidence.	Raw growth alone does not prove misstatement; do not silently relabel the dataset twelve months.

Non-credit errors

No unequal-period comparison is automatically annual growth evidence.

Official ICAI concept source, SA 520 paragraphs 5(b)-(c)/7/A1/A12/A15

AUD-G11-D028 · 5 marks

One unusual relationship, two purposes A simple year-on-year comparison helped identify a possible risk at planning. Later the team reuses it unchanged as sole substantive evidence for a complex assertion, without defining precision or an acceptable difference. Required: Explain purpose, suitability, reliability, precision and acceptable difference. (5 marks)

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Marks	Credit	Case application / answer
1	Procedure purpose matters even if method looks similar.	Risk-assessment use is addressed by SA315; it does not automatically satisfy SA520 substantive requirements.
1	Determine suitability for the given assertion and assessed risk.	The complex assertion may require a different model or detail work.
1	Evaluate reliability/comparability of expectation inputs.	Prior-period data needs contextual support rather than automatic acceptance.
1	Develop/evaluate sufficient expectation precision.	An exploratory comparison may be too broad to detect relevant material misstatement.
1	Determine acceptable difference and investigate required inconsistencies.	The unchanged comparison lacks a defined supported substantive criterion; add the appropriate design/response rather than call it sufficient by reuse.

Non-credit errors

No planning-useful means substantively sufficient.

Official ICAI concept source, SA 520 paragraphs 1/5/7/A4-A6

AUD-G11-D029 · 10 marks

Sales ratio diluted by the wrong denominator For this exercise, verified net sales are Rs 120 lakh and cost of sales Rs 90 lakh. A schedule adds an unrelated asset disposal receipt of Rs 30 lakh to the denominator and presents gross profit Rs 30 lakh as a "20% sales margin". A properly comparable supported expected gross margin is 25%. No other sales/cost components apply. The auditor treats apparent 20% versus 25% as proof of a sales misstatement. Required: Calculate correct and erroneous ratios, diagnose the comparison, and explain evidence/design and conclusion limits. (10 marks)

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Marks	Credit	Case application / answer
1	Calculate gross profit from supplied sales/cost.	Rs 120 lakh-Rs 90 lakh=Rs 30 lakh.
1	Identify the appropriate sales denominator.	Use Rs 120 lakh net sales for this gross-margin relationship, not the unrelated disposal receipt.
1	Calculate actual gross sales margin.	Rs 30 lakh/Rs 120 lakh=25%.
1	Calculate the erroneous diluted ratio.	Rs 30 lakh/Rs 150 lakh=20%.
1	Quantify the apparent percentage-point gap.	20% versus 25% is 5 percentage points caused here by denominator contamination, not supported proof of sales error.
1	Compare the correct ratio with the supplied expectation.	Correct 25% equals expected 25%, under these exercise definitions.
1	Check source information and ratio definitions.	Verified inputs and comparable definitions matter; confirm source/data composition before relying on a reported ratio.
1	Evaluate precision and assertion suitability.	A correct ratio can corroborate relevant work but does not automatically prove all revenue/cost assertions.
1	Investigate actual inconsistent evidence if present.	Correcting the definition error does not authorise ignoring other evidence or potential aggregated misstatement.
1	Do not prescribe fraud, adjustment or opinion solely from the raw gap.	Conclude from supported results and other necessary work, not a flawed denominator.

Non-credit errors

No contaminated denominator proves a sales misstatement.

Official ICAI concept source, SA 520 paragraphs 5/7/A1-A2/A12/A15-A16

AUD-G11-D030 · 10 marks

Review memo closes every issue with a verbal explanation Near-end analytics reveal different issues: component revenue patterns inconsistent with reliable operating information; a changed business model not reflected in the expectation; an apparent ratio gap caused by non-comparable definitions; and a disclosure inconsistent with the auditor understanding. The memo says "management explained everything", records no supporting evidence and declares all assertions fully verified. Required: Correct five issue/evidence decisions and explain five overall-review limits/actions. (10 marks)

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Marks	Credit	Case application / answer
1	Investigate the component inconsistency.	Use the reliable operating information and actual component relationship, not only a consolidated reassuring total.
1	Reconsider the expectation after known business changes.	Old relationships may no longer support the same prediction.
1	Resolve ratio-definition comparability before diagnosing error.	A mismatched comparison is not proof of misstatement; use a supported consistent definition.
1	Consider the inconsistent disclosure in overall statement understanding.	A stable numeric total does not automatically make the disclosure consistent.
1	Obtain appropriate evidence relevant to management explanations.	A bare management-explained line is not corroboration.
1	Perform other procedures necessary where explanation/support inadequate.	Investigate actual causes rather than accepting every narrative.
1	Assess previously unrecognised risks.	The near-end findings may require revised risk assessment and further planned work under relevant requirements.
1	Use overall analytics to corroborate conclusions about audited elements.	They assist overall conclusion; do not replace every assertion procedure with the memo.
1	Evaluate individual/aggregated potential misstatement and actual evidence sufficiency.	No blanket full-verification claim follows from a review or verbal assurance.
1	Conclude only after the relevant findings and evidence are evaluated.	Do not automatically sign off, adjust or select an opinion from unexpected relationships alone.

Non-credit errors

No inquiry-only global closure or all-assertions guarantee.

Official ICAI concept source, SA 520 paragraphs 5-7/A6/A12/A17-A21