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Analytical Procedures

Analytical procedures involve evaluating financial information by analyzing relationships among financial and non-financial data. Substantive analytical procedures require determining the suitability of specific procedures for given assertions based on risks, evaluating the reliability of data used to develop expectations, developing a precise expectation to identify misstatements, and determining an acceptable difference between recorded and expected amounts. Analytical procedures also help form an overall conclusion near the end of an audit. If results are inconsistent or differ significantly from expectations, the auditor must investigate by inquiring of management and performing other procedures.

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25 views

Analytical Procedures

Analytical procedures involve evaluating financial information by analyzing relationships among financial and non-financial data. Substantive analytical procedures require determining the suitability of specific procedures for given assertions based on risks, evaluating the reliability of data used to develop expectations, developing a precise expectation to identify misstatements, and determining an acceptable difference between recorded and expected amounts. Analytical procedures also help form an overall conclusion near the end of an audit. If results are inconsistent or differ significantly from expectations, the auditor must investigate by inquiring of management and performing other procedures.

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Shariful Hoque
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ASSURANCE NOTES | HTK Consulting

ANALYTICAL PROCEDURES: CAS 520


Definition
 Analytical procedures = evaluations of financial information through analysis of plausible
relationships among both financial and non-financial data. A
 Analytical procedures also encompass investigation of identified fluctuations or relationships that
are inconsistent with other relevant information or that differ from expected values by a
significant amount

Substantive Analytical Procedures


 When designing and performing substantive analytical procedures, the auditor shall:
o Determine the suitability of particular substantive analytical procedures for given
assertions, taking account of the risks of material misstatement and tests of details
o Evaluate the reliability of data from which the auditor's expectation or ratios is developed,
taking account of source, comparability, and nature and relevance of information available,
and controls over preparation
o Develop an expectation of recorded amounts or ratios and evaluate if the expectation is
precise to identify a misstatement that may cause the F/S to be materially misstated
o Determine the amount of any difference of recorded amounts from expected values that is
acceptable without further investigation

Analytical Procedures that Assist When Forming an Overall Conclusion


 Perform analytical procedures near the end of the audit when forming an overall conclusion as to
whether the F/S are consistent with the auditor's understanding of the entity

Investigating Results of Analytical Procedures


 If analytical procedures performed identify fluctuations or relationships that are inconsistent with
other relevant information or that differ from expected values by a significant amount, the auditor
should investigate by:
(a) Inquiring of management and obtaining appropriate audit evidence relevant to
management's responses; and
(b) Performing other audit procedures as necessary

Notes Prepared by HTK Consulting | www.htkconsulting.com

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