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Evidence
Substantive analytical procedures
Substantive analytical procedures: Analytical procedures involve the
evaluation of financial information through analysis of plausible
relationships among both financial and non-financial data. As a
substantive procedure they help test the figures in the financial
statements for material misstatement.
The use of analytical procedures as substantive evidence is generally more
applicable where:
there are large volumes of transactions.
relationships exist amongst the data and are believed to be over time.
controls are working effectively.
The suitability of analytical procedures depends on four factors:
The assertion/s under scrutiny
The reliability of the data
The degree of precision possible
The amount of variation which is acceptable.
If analytical procedures identify fluctuations or relationships that are inconsistent with
the auditor's knowledge of the business then the auditor should investigate through:
Enquiry of management.
Other procedures, as deemed necessary, for example, when management's
response is considered inadequate.
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