An analytical review is used by auditors to assess the reasonableness of account balances . A CPA does this by comparing changes in account balances over time, as well as by comparing related accounts. ... If sales increase by 20% during the review period, then accounts receivable should increase by a similar amount.
Are analytical procedures substantive tests?
Analytical procedures are used as a substantive test to obtain evidential matter about particular assertions related to account balances or classes of transactions . In some cases, analytical procedures can be more effective or efficient than tests of details for achieving particular substantive testing objectives.
What type of audit test is analytical review?
Analytical procedures are performed as an overall review of the financial statements at the end of the audit to assess whether they are consistent with the auditor’s understanding of the entity. Final analytical procedures are not conducted to obtain additional substantive assurance.
What are the types of audit test?
- #1 – Risk Assessment.
- #2 – Test of Control.
- #3 – Substantive Test – Transactions.
- #4 – Substantive Test – Procedures.
- #5 – Test of Balances.
What are the five major types of analytical procedures in auditing?
Typically, five types of audit procedures normally use by auditors to obtain audit evidence. Those five audit procedures include Analytical review, inquiry, observation, inspection, and recalculation .
What are some examples of analytical procedures?
- Compare the days sales outstanding metric to the amount for prior years. ...
- Review the current ratio over several reporting periods. ...
- Compare the ending balances in the compensation expense account for several years. ...
- Examine a trend line of bad debt expenses.
What is the purpose of analytical procedures in an audit?
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 .
Are substantive analytical procedures required?
To derive the most benefit from substantive analytical procedures, the auditor should perform substantive analytical procedures before other substantive tests because results of substantive analytical procedures often impact the nature and extent of detailed testing.
What is the difference between substantive procedures and analytical procedures?
Substantive tests, aka tests of balances, are more statistical driven and really dig into the details of the balances themselves. Analytical Procedures ARE $ ubstantive Procedures . Notice the S in substantive. There are two main types of activities auditors perform–tests of internal controls and $ubstantive testing.
What are the three types of substantive tests?
The three types of substantive tests are analytical procedures, a test of details of transactions, and tests of details of balances .
What are the 3 types of audits?
There are three main types of audits: external audits, internal audits, and Internal Revenue Service (IRS) audits . External audits are commonly performed by Certified Public Accounting (CPA) firms and result in an auditor’s opinion which is included in the audit report.
What are two types of auditing methods?
These methods include (listed in order of complexity from lowest to highest): inquiry, observation, examination or inspection of evidence, re-performance, and computer assisted audit technique (CAAT).
What are the two types of audit tests?
Two overarching test types include analytical procedures and substantive tests of detail . Another audit test focuses on internal controls, which are the procedures a company uses to protect its information from fraud and abuse.
What are the 5 audit procedures?
There are five phases of our audit process: Selection, Planning, Execution, Reporting, and Follow-Up .
What are the 7 audit procedures?
Audit procedures to obtain audit evidence can include inspection, observation, confirmation, recalculation, reperformance, and analytical procedures , often in some combination, in addition to inquiry.
What are the 14 steps of auditing?
- Receive vague audit assignment.
- Gather information about audit subject.
- Determine audit criteria.
- Break the universe into pieces.
- Identify inherent risks.
- Refine audit objective and sub-objectives.
- Identify controls and assess control risk.
- Choose methodologies.
