7-37 Analytical procedures consist of evaluations of financial information made by a study of plausible relationships among both financial and non-financial data. They range from comparisons to use the complex models involving many relationship and elements of data. They involve comparisons of recorded amounts, or ratios developed from recorded amounts, to expectations developed by the auditors.
a. Describe the broad purposes of analytical procedures
b. When are analytical procedures required during an audit? Explain why auditors use analytical procedures extensively in all parts of the audit.
c. Describe the factors that influence the extent to which an auditor will use the results of analytical procedures to reduce detailed tests in meeting audit objectives.
(a) Analytical procedures are tests devised by the auditor to determine if the auditing assertions have been met by management. The auditor determines both the substantive and analytical procedures that are needed given the various elements specific to the audit and the auditor is then able to test and the levels relevant to the audit (low risk, average risk, high risk). The analytical procedures will vary based upon the type and size of the company, and are suited to the specific company. The auditor uses the results of the analytical procedures to determine if additional ...
This solution discusses the purpose of analytical procedures, when they are required during an audit and why auditors use these types of procedures. This solution also discusses the factors that influence the extent to which an auditor can use the results of analytical procedures to reduce detailed testing.