Page 133 - Microsoft Word - 00 P1 IW Prelims.docx
P. 133

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.






















                                                                                                     129
   128   129   130   131   132   133   134   135   136   137   138