What are Analytical procedures in Audit

Analytical procedures create a good impact and helps you to understand what is going on in your business. Analytical procedure basically the evaluation of financial information or analysis.

Basically Analytical means (to analyze). “The auditor tries to make some relation between financial and non-financial data“. By utilizing the relation an auditor found out the audit evidence.

While doing analytical procedures a person must have well knowledge and experience. A single mistake lead risk in business and problems.

Read Also: What is Auditor and Audit Committee

When analytical procedures are performed?

Suppose you are business man and do not make a plan you are taking risk. Either you have too much money or you don’t care of yourself and your family. You must have creative ideas knowledge and planning as well as budget too. so in business To performed an analytical procedures you must do planning stage. Make a plan or strategy to accomplish your goals.

Why Analytical Procedures are Necessary?

Why this is necessary because planning stage keep you away from risk or to help you extend timing and audit procedures. Detailed testing stage is to be done as per ISA’s. Detailed testing give you opportunity to test all your aspect of business or areas of risk and helps in auditing where money flow or where money gone or what happening in the business.

Provide a source of evident must be needed like you got a check and you just write check is received then you must have the copy of the check, so it will be used as evidence. Review testing which is review all of your business activity again to ensure that all you done is good or not Which will helps you in getting all the point clear. So these are the aspect which helps you to grow your business and well stand in competition with the other business man.

Implementation of analytical procedures

1. The auditor implements analytical procedures when becoming aware of the entity and its environment and assessing the risk of significant anomalies in the accounts. At this stage, the use of this technique can in particular allow the auditor to identify unusual transactions or events.
2. When the auditor designs the substantive controls to be implemented, in response to his risk assessment at the assertion level and for the transaction categories, the account balances and the information provided in the appendix which Significantly, it can use analytical procedures as substance controls. This is the case, for example, when he considers that these procedures, alone or in combination with others, are more effective than the detailed tests alone.
3. The auditor implements analytical procedures during the review of the overall consistency of the accounts, carried out at the end of the audit. The application of this technique allows him to analyze the overall consistency of the accounts with regard to the elements collected throughout the audit, on the entity and its sector of activity.
4. When the analytical procedures highlight information which is not correlated with other information or significant variations or unexpected trends, the auditor shall determine the audit procedures to be put in place to elucidate these variations and these inconsistencies.
5. When the analytical procedures lead the auditor to identify risks not previously detected, he assesses the need to complete the audit procedures he has carried out.