ISA 520

Question 1

What is analytical procedure?

Answer 1

It is Evaluation of Financial information through Plausible relationships, with other financial and non financial information and Comparison.

it also inclue investigation if actual values are significantly different from expected values

Question 2

What are the Exapmles of Analytical Procedures?

Answer 2

1) Calculating Plausible Relationships
* Among Financial information ( eg GP ratio)
* Among financial and non financial Information ( Payroll expense to numer of employees).
2) Making the comparison of current year with
* Prior accounting period.
* Industry average results.( as whole or with individual company)
* Compareable part of same entity.

Question 3

What are the uses and purposes of Analytical procedures?

Answer 3

There are three main perposes:
* As risk assesment procedures.( preliminary analytical procedure).
* As substantive procedure.( Substantive analytical procedure)
* Near the end of audit in forming analytical procedure (Final analytical procedure).

Question 4

What are the uses of substantive procedure as analytical procedure?

Answer 4

1) Determine the suitability of analytical procedure for given assertion.
2) Evaluate the reliability of data for which auditor expectation is developed.
3) Develope Sufficient precise expectation to identify misstatement.
4) Determine acceptibility difference.