Analytical procedures are one of many financial audit processes which help an

auditor An auditor is a person or a firm appointed by a company to execute an audit.Practical Auditing, Kul Narsingh Shrestha, 2012, Nabin Prakashan, Nepal To act as an auditor, a person should be certified by the regulatory authority of accounting an ...

understand the client's business and changes in the business, and to identify potential

risk In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environme ...

areas to plan other audit procedures. It is also the evaluation of

financial information Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of finan ...

made by a study of plausible or credible relationships among both financial and non financial data

Use and stage

Analytical procedures are performed at three stages of audit: at start, in middle and at end of audit. These three stages are

risk assessment Broadly speaking, a risk assessment is the combined effort of: # identifying and analyzing potential (future) events that may negatively impact individuals, assets, and/or the environment (i.e. hazard analysis); and # making judgments "on the ...

procedures, substantive analytical procedures, and final analytical procedures. * Risk assessment procedures are used to assist the auditor to better understand the business and to plan the nature, timing and extent of audit procedures. * Substantive analytical procedures are used to obtain evidential matter about particular assertions related to account balances or classes of transactions. * Final analytical procedures are used as an overall review of the financial information in the final review stage of the audit.

Evidence

Analytical procedures include comparison of financial information (data in

financial statement Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to un ...

) with prior periods,

budget A budget is a calculation play, usually but not always financial, for a defined period, often one year or a month. A budget may include anticipated sales volumes and revenues, resource quantities including time, costs and expenses, environme ...

s, forecasts, similar industries and so on. It also includes consideration of predictable relationships, such as gross profit to

sales Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale. The seller, or the provider of the goods or services, completes a sale in ...

payroll A payroll is the list of employees of some company that is entitled to receive payments as well as other work benefits and the amounts that each should receive. Along with the amounts that each employee should receive for time worked or tasks pe ...

costs to

employee Employment is a relationship between two parties regulating the provision of paid labour services. Usually based on a contract, one party, the employer, which might be a corporation, a not-for-profit organization, a co-operative, or any o ...

s, and financial information and non-financial information, for examples the CEO's reports and the industry news. Possible sources of information about the client include interim financial information,

s, management accounts, non-financial information, bank and cash records, VAT returns, board minutes, and discussion or correspondence with the client at the year-end.

Use and stage

Evidence

See also