Accept client and perform initial audit planning 2. Effective for audits of financial statements for periods ending on or afterdecember15,2012. They are also carried out at the time of finalization of an audit to make sure the overall conclusions drawn are consistent. International standard on auditing isa 520, analytical procedures should be.
In these circumstances, although the auditor may be able to perform limited analytical procedures for purposes of planning the audit or obtain some information through inquiry, the auditor may need to plan to perform analytical procedures to identify and assess the risks of material misstatement when an early draft of the entitys financial. Five types of analytical procedures compare client data with. Analytical procedures are typically used to determine whether a financial statement contains relationships and items that are unusual. Analytical procedures are used by external auditors to get an overall assessment of financial information provided by the company thats being audited. Chapter 8 audit planning and analytical procedures. Analytical procedures are a key piece of the audit process. Unexpected fluctuations that influence auditors to revise their audit plans find. Analytical procedures and audit planning decisions. Planning an audit 265 aucsection300 planning an audit source. Compare client data with similar prior period data 2004 2003 1. Now customize the name of a clipboard to store your clips. In response to increased coticems about audit efficiency and effectiveness, analytical procedures are increasingly being used in place of and as a supplement to substantive tests of details. Chapter 8 audit planning and analytical procedures the 1 st field work standard of gaas imposes on an auditor an obligation of adequately planning the audit. Multiplying the number of units sold times sales price to predict sales revenue, or multiplying the number of employees times weekly or monthly salaries to predict salaries and wages expense, for example, can contribute a majority of the evidence necessary to enable an auditor to evaluate the.
Analytical procedures and audit planning decisions unexpected fluctuations that influence auditors to revise their audit plans. Chapter 7audit planning and analytical procedures 2. 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 auditors understanding of the entity isa hksa 5206. How auditors use analytical procedures weaver assurance, tax. Audit planning and analytical procedures by hsun chen.
The importance of analytical procedures is demonstrated by the fact that the auditing standards board, which establishes the standards for conducting financial statement audits, has required that analytical procedures be. Analytical procedures analytical procedures have become increasingly important to audit firms and are considered to be an integral part of the audit process. Pwc utb5 industry, regulatory and other external factors. Understand internal control and assess control risk 7. Analytical procedures are a type of evidence used during an audit. Acc 2105 5 audit planning and analytical procedures. Analytical procedures p7 advanced audit and assurance. Analytical procedures that assist when forming an overall. Several studies have been performed on analytical procedures but there is still interesting to study it.
Uden supply has projected its 2004 gross profit at 31% of sales despite expectation for some shrinkage in margins. Summary of analytical procedures compare ratios of recorded amounts to auditor expectations. They are carried at the execution stage to obtain audit evidence. Application of analytical procedures may indicate aspects of the entity of which the auditor was unaware and will assist in assessing the risks of material.
Understand internal control and assess control risk. After studying this chapter, students should be able to. Several studies have been performed on analytical procedures but there is. Assist in understanding the business identify areas of potential risk to plan the nature, timing and extent of other audit procedures. Used in planning to understand clients business and industry. With our online resources, you can find chapter 8 audit planning analytical procedures arens or just about any type of ebooks, for any type of product. Analytical procedures are performed at three stages of audit. Auditing at the planning stage, they serve to identify areas of potential audit risk and help in planning the nature, timing and extent of other procedures. Uncategorized article uditors perform analytical procedures in planning the nature, timing and extent of testing.
Examples of analytical procedures related to revenue accounts. According to isa 520 analytical procedures, the application of analytical procedures at the planning and overall stages is essential and mandatory in the conduct of any audit. 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. The guide summarizes applicable requirements and practices and delivers howto advice for handling analytical procedures used in audits. Analytical procedures can be based upon interim accounts, draft financial statements, budgets etc. Examples of analytical procedures related to revenue. Chapter 8 discusses the steps involved in the audit planning process as well as the usefulness of analytical procedures in the planning process, especially in helping the auditor gain an understanding of the clients. Auditing and assurance services, 15e arens chapter 8. Analytical procedures involve comparisons of different sets of financial and operational information, to see if historical relationships are.
Chapter 6audit evidence, audit objectives, audit programs. Analytical procedures are also commonly used in nonaudit and assurance. The guide summarizes applicable requirements and practices, and delivers howto advice for handling analytical procedures used in audits. To prevent bias in judgment, the auditor should determine the threshold while planning the substantive analytical procedures, ie before step 3, in which the. Clipping is a handy way to collect important slides you want to go back to later.
Make client acceptance decisions and perform initial audit planning. The aicpa audit guide analytical procedures, updated as of march 1, 2012, includes relevant guidance contained in applicable standards and other technical sources. Figure 68 on page 212 provides an overview of the types of tests included in an audit program. Analytical procedures in audit help with the following. Compare client and industry data 000 % of net sales 000 % of net sales client industry 2005 2004 2005 2004 inventory turnover 3. Glover and others published analytical procedures and audit planning decisions. Analytical procedures presentation linkedin slideshare. The included case study illustrates the use of analytical procedures in planning and substantive testing, utilizing trend analysis, ratio analysis, reasonableness testing, and regression analysis. Analytical procedures psa 520 analysis of significant ratios and trends including the resulting investigation of fluctuations and relationships that are inconsistent with other relevant information or which deviate from predicted amounts evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data.
Jun 24, 2019 analytical procedures are carried out at the planning stage to assess the risk inherent in the financial statements as a whole and in each account head. Identify and resolve potential problems on a timely basis. Audit planning and analytical procedures jzanzig auditing ch 7 lecture 1. It enables the auditor identify areas of potential risk. These procedures can indicate possible problems with the financial records of a client, which can then be investigated more thoroughly. Analytical procedures are an important type of evidence gathering method for an. Properly organize and manage the audit engagement so that it is performed in an effective and efficient manner.
Accept client performance and perform initial audit planning. Company logo adequate planning benefits the audit of financial statements to devote appropriate attention to important areas of the audit. On the basis of udens operating performance in years 2001 2003 project your best guess for 2004. International standard on auditing analytical procedures. It also summarizes requirements and practices and delivers howto advice for. Audit planning and analytical procedures jzanzig auditing. Analytical procedures and auditplanning decisions request pdf. Analytical procedures are one of many financial audit processes which help an auditor understand the clients business and changes in the business, and to identify potential risk areas to plan other audit procedures use and stages. Pdf analytical procedures and audit planning decisions.
Project 2004 based on the incremental changes for each line item. That assessment is used to determine how to proceed with the financial audit. Analytical procedures performed as risk assessment procedures may identify aspects of the entity of which the auditor was unaware and may assist in assessing the risks of material misstatement in order to provide a basis for designing and implementing responses to the assessed risks. Gain an understanding of the clients business and industry. Analytical procedures p7 advanced audit and assurance acca. Analytical procedures involve comparisons of different sets of financial and operational information, to see if historical relationships are continuing forward into the period. Dec 09, 2012 audit planning and analytical procedures jzanzig auditing ch 7 lecture 1. In this authoritative guide, youll find core takeaways from applicable standards and other technical sources. Describe the purpose of analytical procedures performed in the planning stage of the audit. Analytical procedures in audit planning gemanalyst.
Research liberate u shoes by reading the learner material understanding the. Examples of analytical procedures, in the order of their effectiveness, are. Analytical procedures 497 aucsection520 analytical procedures source. Used throughout the audit to identify possible misstatements reduce detailed tests assess goingconcern issues. Effective for audits of financial statements for periods ending on or. It is optional to apply analytical procedures as substantive tests. Pdf chapter 8 audit planning and analytical procedures.
Audit planning and analytical procedures flashcards. Chapter 8 audit planning and analytical procedures learning objective 81 1 a measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued is the. Analytical procedures are used in the financial audit to assist in the understanding of business operations and in the identification of potential risk areas that need to be addressed. Audit planning and analytical procedures jzanzig auditing ch. The auditor after carrying out the variance analysis and noticing any high material misstatement variance in the transaction can flag it as a potential risk item for more audit.
It also deals with the auditors responsibility to perform analytical procedures near the end of the audit that assist the auditor when forming an overall conclusion on the financial statements. Analytical procedures as risk assessment procedures 8. It also summarizes requirements and practices and delivers howto advice for handling analytical procedures used in audits. Analytical procedures used in planning the audit generally use data aggregated at a high level. In other words, they are actions taken by auditors to understand the companys finances, operating environment, and history.
Nov 07, 2016 analytical procedures in audit help with the following. As a result of their importance, developing and documenting analytical procedures can consume a lot of time. The auditor should apply analytical procedures as risk assessment procedures to obtain an understanding of the entity and its environment. Set materiality and assess acceptable audit risk and inherent risk. Pwc utb7 researching your client individual exercise tasks. Moreover, it is advisable to incorporate of analytical procedures as part of the substantive procedures design to obtain audit evidence directly. Once the analysis identifies areas of concern, the auditor must conduct a further investigation in order to pinpoint the source of the underlying problem. Analytical procedures are performed at three stages of audit, namely planning, execution and completion, serving three primary purposes. Isa 3151 deals with the use of analytical procedures as risk assessment procedures. But analytics can have an even bigger impact when these.
In both cases, the analytical procedures, combined with the auditors knowledge of the business, serve as a basis for additional inquiries and effective planning. What are analytical procedures and when are they used. Realworld cases that involve compa nies in which management fraud has actually taken place represent an in valuable resource for implementing the tandem approach. Analytical procedures can be applied to all the stages of the audit i. The purpose of applying analytical procedures in planning the audit is to assist in planning the nature, timing, and extent of auditing procedures that will be used to obtain evidential matter for specific account balances or classes of transactions. An illustrative analytical procedures program that presents some of the common types of analytical procedures that may be applied to material financial statement classifications, and that demonstrates their use in audit planning, is available by registering through the news box on my website. Unexpected fluctuations that influence auditors to revise their audit plans. Analytical procedures enable the auditor to direct audit efforts to areas of financial statements where the reported amounts vary from those that the auditor expected. Set materiality and assess acceptable audit risk and inherent risk 6. Auditor uses aps in the planning phase, the substantive testing phase and in. The case pre sented in this paper, miniscribe corporation, illustrates how such cases. Audit programstates the audit procedures that the auditor believes are necessary to accomplish the objectives of the audit. Analytical procedures are one of many financial audit processes which help an auditor understand the clients business and changes in the business, and to identify potential risk areas to plan other audit procedures.
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