AUDITING
ANALYTICAL PROCEDURES (BSA-520)
Lecture # 13
Analytical procedure means evaluations of financial information made by a study of plausible
relationships among both financial and non-financial data. Analytical procedures also encompass
the investigation of identified fluctuations and relationships that are inconsistent with other relevant
information or deviate significantly from predicted amounts.
Nature and Purpose of Analytical Procedures
Analytical procedures include the consideration of comparisons of the entity’s financial information
with, for example:
• Comparable information for prior periods.
• Anticipated results of the entity, such as budgets or forecasts, or expectations of the auditor,
such as an estimation of depreciation.
• Similar industry information, such as a comparison of the entity’s ratio of sales to accounts
receivable with industry averages or with other entities of comparable size in the same
industry.
Analytical procedures also include consideration of relationships:
• Among elements of financial information that would be expected to conform to a
predictable pattern based on the entity’s experience, such as gross margin percentages.
• Between financial information and relevant non-financial information, such as payroll costs
to number of employees.
