What are substantive analytical procedures?

Practical examples of analytical procedures

When performing an audit, the auditor, based on his professional judgment and depending on the results he expects, may choose which procedures to apply in the performance of the audit work; among the possibilities are the substantive analytical procedures.

For their application, the auditor must be sure that the necessary information is available and truthful, since the use of information prepared by management can be effective if the auditor has a reasonable degree of certainty that the information has been adequately prepared. In turn, the results of the application of similar analytical procedures used in previous audits should be verified.

“the appropriate use of a particular analytical procedure will depend on the auditor’s assessment of the effectiveness of the procedure in detecting an inaccuracy “Tweet ThisHowever, the appropriate use of a particular analytical procedure will depend on the auditor’s assessment of the effectiveness of the procedure in detecting an inaccuracy that may lead to material misstatement of the financial statements. For example, when an entity has low staff turnover and fixed salaries, the auditor can use such information and estimate total salary costs for a given period with a high degree of accuracy, thus obtaining audit evidence on a significant item in the financial statements, reducing the need for further testing of payroll.

What are substantive analytical procedures?

Substantive analytical procedures are procedures used by the auditor to evaluate the reasonableness of an account and consist of comparing the recorded with the auditor’s expectations.

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What are analytical audit procedures?

Analytical procedures are evaluations performed by the auditor on the financial statements, which consist of comparing what has been recorded with the auditor’s expectations. … From this analysis the auditor can identify useful information about his client’s performance.

What are the analytical procedures?

Analytical procedures are defined as the analysis of significant ratios and trends, including the corresponding investigation of items and fluctuations that are inconsistent with other relevant information or that deviate materially from amounts expected or estimated.

Nia 520 practical examples

ISA 520 talks about analytical audit procedures, which are necessary to obtain relevant and reliable evidence about the reasonableness of the financial statements to support the audit opinion.

Learn when they should be performed; what testing protocols the auditor should follow when applying them; what is sought with substantive analytical protocols and which ones exist; the investigation of the results of such procedures when there are variations or inconsistencies; and what are the detailed tests.

These analytical procedures are typically planned for a date close to the closing date, so as to allow the auditor to have a global understanding of the behavior of the main figures and assertions of the financial statements being audited. The analytical review consists of analyzing the behavior, relationships and significant trends arising mainly from financial and non-financial information.

What are substantive procedures?

Substantive procedures, means tests performed to obtain audit evidence to detect material misstatements in the financial statements, and are of two types: Substantive analytical procedures; and. Tests of details of transactions and balances.

What is the analytical procedure?

The analytical or detailed procedure uses auxiliary accounts for each of the movements of the merchandise account generated, for which it is necessary to carry out merchandise counts in order to know the final inventories.

What are the substantive tests?

Substantive audit tests

Substantive audit tests are evaluative procedures performed after an analysis by the company of its accounting records and financial statements, designed to obtain reasonable assurance about the completeness, validity and accuracy of the data and information reported.

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What are substantive procedures?

Substantive tests should be approached with a scope inversely proportional to the results or absence of tests to controls. That is to say, if the results of the tests to the controls were satisfactory (positive) the scope of our substantive tests should be smaller, but if the results of the tests to the controls were not satisfactory (negative) or we did not perform tests to the controls, the scope of our substantive tests should be larger. For these cases it is necessary for the auditor to use his professional judgment to determine whether he obtained sufficient and appropriate evidence to conclude whether the audited figures are reasonable.

It is advisable to perform the analytical procedures first because the results of these procedures may impact the nature and scope of the detailed tests. Analytical procedures can help us identify areas of increased risk, and the assurance obtained from substantive analytical procedures will reduce the amount of assurance needed from other tests.

What are the audit assertions?

Assertions: ISA 315 defines assertions as: a representation or statement of an entity’s management, explicit or otherwise, incorporated in the financial statements, as understood or used by the auditor in considering the various types of possible misstatements that may occur.

What should you include in the investigation of the results of analytical procedures?

Investigation of the results of the analytical procedures: Based on the results of the application of the analytical procedures, the auditor should determine whether there are fluctuations or relationships that are inconsistent with relevant information or differ from the expected amounts.

What procedures are covered by the substantive audit procedure?

Substantive procedures comprise substantive analytical procedures and tests of detail (of types of transactions, accounting balances and disclosures).

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Example substantive analytical procedures

In addition to the serious problem of non-compliance with the AS, the above drawbacks are reflected in the need to apply additional audit procedures after the audit is completed, resulting in a significant investment of time for the team.

First, in accordance with ISA 315, Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment, analytical procedures will be discussed as risk assessment procedures. Also, in accordance with ISA 520, Analytical Procedures, review the auditor’s objectives in applying analytical procedures, including:

How often is it observed that audit work programs are defined, without having performed an identification and assessment of risks of material misstatement? Even without having performed audit planning? The use of analytical procedures allows the auditor, in an efficient way, to identify possible risks of error, but not only this, it also allows him to learn about the audited entity, its financial development and industry trends of the entity.