All AAA questions will include this professional skill as it is fundamental that candidates can demonstrate their assessment of a given scenario and the application of their knowledge.
The scenario will require an assessment of the financial reporting issues of the client, the ethical or legal and regulatory issues and their impact on the audit process. This may be at the planning or completion and reporting stage of the audit, so candidates need to ensure that any recommendations for further actions are relevant to that point of the engagement.
It is important that candidates ensure that any analysis or evaluation is contextual and must take into account the situation in which the organisation in the question operates.
Analysis can be demonstrated by appropriate use of the information to determine suitable calculations to support your evaluation. The ability to draw appropriate conclusions from the analysis should be demonstrated, so that appropriate responses or actions can be proposed.
Identifying where data or information appears to be omitted or where further analysis is needed to make a recommendation is also important, as that means a full evaluation cannot be performed, for example, understanding the basis of a provision and understanding how the audit team can gain sufficient and appropriate audit evidence in the circumstances.
An evaluation is a balanced appraisal to determine the impact of a course of action, for example, if a client does not amend a material misstatement in the financial statements, candidates need to be able to explain the implications on the auditor’s report.