Problem
• During audit planning, you are assigned to do preliminary analytical procedure on examining the reasonableness of sleeping room revenues for Sooner Hotels. Use the room revenue work paper template provided in Appendix A along with the external hotel and industry information obtained by the staff person to develop an expectation for Sooner's 2021 sleeping room revenues.
• Are Sooner's reported sleeping room revenues within your "reasonableness range?" (Document all your work.)
• If reported sleeping room revenues were inside your "reasonableness range", would your analytical procedure provide sufficient evidence for you to conclude Sooner's 2021 sleeping room revenues are fairly presented?
• If reported sleeping room revenues were outside your "reasonableness range," what could explain the difference?
• During audit testing, you are assigned to do substantive analytical procedures on examining the reasonableness of sleeping room revenues for Sooner. Review the internal client records provided in Appendix B. Use the room revenue work paper template provided in Appendix A along with the internal client records provided in Appendix B to develop an expectation for Sooner's 2021 sleeping room revenues.
• Are Sooner's reported sleeping room revenues within your "reasonableness range?" (Document all your work.)
• If reported sleeping room revenues were inside your "reasonableness range", would your analytical procedure provide sufficient evidence for you to conclude Sooner's 2021 sleeping room revenues are fairly presented?
If reported sleeping room revenues were outside your "reasonableness range," what could explain the difference?
What other qualitative considerations would need to be considered before concluding whether additional testing would be warranted?
What is the advantage of developing an expectation using the disaggregated internal client data in Appendix B to the aggregated external industry data obtained by the staff person?
What is the disadvantage of developing an expectation using the disaggregated internal client data in Appendix B to the aggregated external industry data obtained by the staff person?
What other testing, if any, would need to be performed related to the substantive analytical procedure before a conclusion could be made?