Northwest
Case 8.2
Northwest Bank
Developing Expectations for Analytical Procedures
Analytical procedures are used for many purposes, such as to understand the clients industry or business, assess the entity’s ability to continue as a going concern, and to indicate the presence of possible misstatements. The audit approach for Northwest Bank calls for the audit team to gain assurance on the fairness of loan interest income primarily through the performance of analytical procedures. Additional detailed testing will only be performed if analytical procedures suggest interest income is materially misstated. A misstatement of $525,000 is considered material.
The audit team developed an expectation for loan interest income using the average loan volume multiplied by the weighted average interest rate. By using this analytical procedure we were able to develop that 2004 and 2005 interest income analytics were immaterial. However, changes in real estate and agricultural industries......
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Approximate Pages: 3 (250 words per double-spaced page)
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