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Hey, scholars. We’re now going to take a look at trying to understand a little bit about those analytical procedures. We’re going to take a look at some tables and just say, you know, what would draw your attention. No right or wrong, it’s personally your professional judgment. So we’re going to take a look at this very first one together. The objective of analytical procedures during the planning stage is to identify unusual items, items that ultimately are going to need more attention later on, items that look weird to you, etc. So it enhances the auditor’s understanding of the entity and of the transactions and events that occur. It also identifies unusual events, amounts, ratios, trends that might be significant to the financials and represent significant risk areas. So let’s take a look. We were told that in this particular company, they literally went up by over 50%. Let’s move on to the next analysis here. And what you can see is sales went up by literally 50%. Cost of goods sold seem to go the same. Let’s go on to the next item. All right, now in this case you’ll notice that what we have is we have 50% up. So profit margin seems to be about the same. We also look at gross margin. Okay, wow. We look at that and then we also look here and we see that we have operating income. So we’re kind of getting a feel for where things are going in this case. So we go through that and we say preceding year versus the current. And you can see that we have the percentages. If sales are a whole amount, we have the actual profit margin being about the same, and we have operating income being a little bit better. But obviously we’d like to ask why is that happening. Why are sales going up? Why did sales go up so much? Well, let’s go on to the next area. So you can see, maybe I should wear my glasses down like they have on my character there. Right? Right, well anyway, I got to love these pictures. I can tell you they respect me out there in California. Nathan inquired of management regarding the increase and they said before the celebrity sighting, our sales were approximately the same. We had no major changes. However, in March, Sugar Bear Peter Olinto was seen walking down the street wearing their clothes. This caused a huge increase in sales by about 160,000 in just March. In addition, this publicity increased the demand for products in subsequent months, approximately 35% in both retail and wholesale. About 30% of Creative CPA clothing sales are generated by the retail stores while the remainder are generated by sales to wholesalers. This is the same mix as Year 1. Creative CPAs opened boutique stores in April of Year 2, resulting in an increase of their existing square footage from 3,000 to 3,500 square feet. So obviously, their business is booming. Let’s go on. So we can see that you can see the 160,000 increase in March. Let’s take a look at some analytics here. You can see there’s the over 160,000, and then we seem to be growing by about that 30-35%. Let’s take a look at another analytic. This analytic shows you the percentage increases. Let’s go on to one more, and it shows you the percentage of sales and what they represented overall towards the 100% annual at the end of the year. You can see the big jump occurred in March. That’s when the sighting occurred. And then since then, yeah, it was proportional, but it was at a large volume number. So things seem to be reasonably ing to the explanations. Let’s go on to the next area. So in this area here, we can see the actual amounts. We can see the year 2 expected. Let’s take a look at the next slide. So we have actual and expected. You can see those titles right there. So it falls into the reasonable expectation that we’ve seen. I believe we have one more item that I want to show you here, so we’ll pop in one more grid. There we are. And you can see Year 2’s actual. And you can see them as percentages. So this gives us an idea. We look to see if there’s unusual relationships, and if there are that can highlight an area, that we want to spend more time looking at, audit risks, etc. So this is a great example of how to use analytical procedures to identify unusual relationships and then investigate them, ask for reasonable explanations, and then move forward with our audit planning. Hopefully this helps. We’re now ready to try a problem.