Nonsubstantive Uses of Analytical Procedures Modern auditing standards require the use of analytical procedures as risk assessment procedures for purposes of planning an audit and determining areas that require attention in developing audit scope.
When to use analytical procedures in auditing?
Analytical procedures are used for the following purposes:
- To assist the auditor in planning the nature, timing, and extent of other auditing procedures.
- As a substantive test to obtain evidential matter about particular assertions related to account balances or classes of transactions.
Are analytical procedures compulsory?
Analytical procedures are compulsory at two stages of the audit under ISA 520 namely the planning stage and the review stage. Analytical procedures use calculations such as financial ratios to generate an expectation of what a figure is likely to be and then comparing this to the actual figure in the accounts.
When must an auditor use analytical review?
Analytical reviews can be quite useful for spotlighting general areas in which financial statements are incorrect or where transactions have been mis-classified. Once the analysis identifies areas of concern, the auditor must conduct a further investigation in order to pinpoint the source of the underlying problem.
What are the five types of general analytical procedures?
To obtain audit evidence, the auditor performs one – or a combination – of the following procedures:
- inspection.
- observation.
- external confirmation.
- inquiry.
- reperformance.
- recalculation.
- analytical procedures.
What are the five major types of analytical procedures in auditing?
Typically, five types of audit procedures normally use by auditors to obtain audit evidence. Those five audit procedures include Analytical review, inquiry, observation, inspection, and recalculation.
What is the difference between substantive procedures and analytical procedures?
Substantive procedures are reviews of documents for a “substantial portion” of account activity, while analytical procedures include controls test and test relying on mathematical relationships reflectinb accounting mechanics, contractual provisions [debt times interest rate], or business capabilities [production per …
When to use analytical procedures in an audit?
Analytical Procedures at the Review stage: At the final review stage the the auditor must design and perform analytical procedures that assist him when forming an overall conclusion as to whether the financial statements are consistent with the auditor’s understanding of the entity and that all of the audit objectives with regard to the
What are the procedures to obtain audit evidence?
To obtain audit evidence, the auditor performs one – or a combination – of the following procedures: analytical procedures.
What kind of assurance do Auditors look for?
.10The auditor considers the level of assurance, if any, he wants from substantive testing for a particular audit objective and decides, among other things, which procedure, or combination of procedures, can provide that level of assurance. For some assertions, analytical procedures are effective in providing the appropriate level of assurance.
When do final analytical procedures need to be performed?
Final analytical procedures are not conducted to obtain additional substantive assurance. If irregularities are found, risk assessment should be performed again to consider any additional audit procedures are necessary.
