Analytical Procedures

CAS 520

Analytical Procedures

CAS 520

Definition
  • Analytical procedures = evaluations of financial information through analysis of plausible relationships among both financial and non-financial data. 
  • 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:
    • Determine the suitability of particular substantive analytical procedures for given assertions, taking account of the risks of material misstatement and tests of details
    • 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
    • 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
    • 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:
    1. Inquiring of management and obtaining appropriate audit evidence relevant to management’s responses; and
    2. Performing other audit procedures as necessary

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