2.0 - Analytical Procedures

Question 1

Define analytical procedures

Answer 1

Evaluations of financial information through analysis of plausible relationships among both financial and non-financial data. They also encompass such investigation as is necessary of identified fluctuations or relationships that are inconsistent with other relevant information or that differ from expected values by a significant amount

Question 2

What does ISA 520, Analytical Procedures require?

Answer 2

Requires auditors to apply analytical procedures in the overall review at the end of the audit and as substantive procedures, to obtain audit evidence directly

Question 3

What does ISA 315, Identifying and Assessing the Risks of Material Misstatements require?

Answer 3

Also requires the auditor to use analytical procedures

Question 4

The ISA states that analytical procedures include the consideration of comparisons with:

Answer 4

• comparable information for prior periods
• anticipated results of the entity, from budgets or forecasts or expectations of the auditor
• similar industry information, such as client’s ratio of sales to trade receivables with industry averages, or with ratios relating to other entities of comparable size in the same industry

Question 5

The ISA states that analytical procedures include the consideration of relationships between:

Answer 5

• elements of financial information that are expected to conform to a predicted pattern based on the entity’s experience, such as the relationship of gross profit to sales
• financial information and relevant non-financial information, such as the relationship of payroll costs to number of employees