In this question, candidates were required to explain analytical procedures, give examples of the types of procedures that could be used and finally the situations in the audit when analytical procedures could be used.

This was a purely knowledge based question providing a relatively lengthy, but hopefully straight-forward introduction to the main application type section of this question.

The question was worth 8 marks. The requirement verb was explained indicating, with the lack of scenario, one mark per point made. Most candidates recognised the mark allocation and divided their time accordingly. A minority of candidates tended to repeat the same or very similar points in each section of the answer, but the overall standard was satisfactory.

A “typical” candidate obtained:

• 1 mark for section (i), with the explanation being limited to providing an overview of analytical procedures,
• up to three marks in (ii)where good examples of different procedures were given. The most common list being comparison within one year, comparisons to different industries and “proof of total”, and
• between 2 and 3 marks for (iii). The marks obtained in this section depended more on provision of examples of the three sections of the audit rather than actually identifying those sections in the answer.

Example comments provided and reasons why those comments did not obtain a pass standard are noted below:

Answer comment
“The main types of substantive procedures include test of control and CAATs”

Examiners assessment of comment
This comment was indicative of a minority of answers which appeared to show inadequate knowledge on this important audit area. The answers provided a lot of detail on control testing and CAATs but really nothing on analytical procedures. Very few or sometimes zero marks were obtained for these answers.

Answer comment
“Analytical procedures can be used at the end of the audit as part of risk analysis.”

Examiners assessment of comment
The place for using analytical procedures is correct. However, the comment “as part of risk analysis” appears out of place or simply not sufficiently well explained. Stating that end of audit analytical review helps compare the auditor’s overall knowledge of the business with the financial statements would be appropriate.

Other common errors included:

• Explaining different methods of collecting audit evidence such as enquiry, computation, observation, etc. These methods of collection are not analytical procedures and therefore did not obtain any marks (part (ii)).
• Re-iterating examples of collecting evidence in part (iii) of the question. The answer needed to focus on the three stages of the audit.
• Not providing sufficient breadth of examples. A minority of answers listed the same analytical procedures for each section of the balance sheet (fixed assets, debtors, creditors etc.). These answers were generally “capped” regarding the marks awarded as “different types” of procedure per the question requirement were not being provided.

Overall, the standard of answers was reasonable. However some answers did not provide the necessary breadth of comment or simply omitted sections altogether, presumably due to lack of knowledge.