These are compulsory at review and at planning stage
Analytical procedures are also an effective tool for gathering evidence throughout the audit.
By using expectations, and comparing to actuals, they highlight unexpected movements
These can then be focussed on during the audit
The financial ratios fall into 3 general categories:
Whether or not the auditor relies on analytical procedures as substantive procedures depends on 4 factors:
Analytical procedures will not be suitable for every assertion
The auditor may only rely on data generated from a system with strong controls
Degree of Precision:
Some figures will not have a recognisable trend over time or be comparable.
Variations having an immaterial impact on the financial statements will not hold as much interest to the auditor as those that do.