Analytical Procedures
01
tecHnicAl
analytical procedures relevAnt to AccA QuAlificAtion PAPers f8 AnD P7
AnD cAt PAPer 8
‘The auditor shall design and perform audit procedures that are appropriate in the circumstances for the purpose of obtaining sufficient appropriate audit evidence.’ (ISA/HKSA 500(6)) To obtain audit evidence, the auditor performs one – or a combination – of the following procedures:
¤ inspection
¤ observation
¤ external confirmation
¤ inquiry
¤ reperformance
¤ recalculation
¤ analytical procedures.
It is mandatory that the auditor should perform risk assessment for the identification and assessment of risks of material misstatement at the financial statement and assertion level, and the risk assessment procedures should include analytical procedures (ISA/HKSA 315(6b)).
It is also mandatory that the auditor should perform analytical procedures near the end of the audit that assess whether the financial statements are consistent with the auditor’s understanding of the entity (ISA/
HKSA 520(6)).
Analytical procedures are also commonly used in non-audit and assurance engagements, such as reviews of prospective financial information, and non-audit reviews of historical financial information. While the use of analytical procedures in such engagements is not covered in the ISAs, the principals regarding their use are relevant.
Definition of AnAlyticAl ProceDures
Analytical procedures consist of
‘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’ (ISA/HKSA 520(4)). A basic premise underlying the application of analytical procedures is that plausible relationships among data may
tecHnicAl
analytical procedures relevAnt to AccA QuAlificAtion PAPers f8 AnD P7
AnD cAt PAPer 8
‘The auditor shall design and perform audit procedures that are appropriate in the circumstances for the purpose of obtaining sufficient appropriate audit evidence.’ (ISA/HKSA 500(6)) To obtain audit evidence, the auditor performs one – or a combination – of the following procedures:
¤ inspection
¤ observation
¤ external confirmation
¤ inquiry
¤ reperformance
¤ recalculation
¤ analytical procedures.
It is mandatory that the auditor should perform risk assessment for the identification and assessment of risks of material misstatement at the financial statement and assertion level, and the risk assessment procedures should include analytical procedures (ISA/HKSA 315(6b)).
It is also mandatory that the auditor should perform analytical procedures near the end of the audit that assess whether the financial statements are consistent with the auditor’s understanding of the entity (ISA/
HKSA 520(6)).
Analytical procedures are also commonly used in non-audit and assurance engagements, such as reviews of prospective financial information, and non-audit reviews of historical financial information. While the use of analytical procedures in such engagements is not covered in the ISAs, the principals regarding their use are relevant.
Definition of AnAlyticAl ProceDures
Analytical procedures consist of
‘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’ (ISA/HKSA 520(4)). A basic premise underlying the application of analytical procedures is that plausible relationships among data may