Audit Guide: Analytical Procedures

1 The Use of Analytical Procedures .01-.48

Concepts and Definitions .03-.13

Analytical Procedures .03-.09

Expectations .10

Precision .11-.12

Level of Assurance .13

Analytical Procedure Process: Four Phases .14-.48

Expectation Formation (Phase I) .16-.40

Identification and Investigation (Phases II and III) .41-.46

Evaluation (Phase IV) .47-.48

2 Questions and Answers .01-.41

Precision of the Expectation .02-.15

Relationship of Analytical Procedures to the Audit Risk Model .16-.21

Evaluation and Investigation .22-.26

Purpose of Analytical Procedures .27-.37

Fraud .38-.41

3 Case Study: On the Go Stores .01-.76

Background Information .03-.10

Nature of the Account or Assertion .08-.10

Example 1: Trend Analysis .11-.25

Expectation Formation (Phase I) .12-.19

Planning Phase: Identification, Investigation, and Evaluation (Phases II–IV) .20-.22

Substantive Testing: Identification, Investigation, and Evaluation (Phases II–IV) .23-.25

Example 2: Ratio Analysis .26-.35

Expectation Formation (Phase I) .27-.31

Identification, Investigation, and Evaluation (Phases II–IV) .32-.35

Example 3: Reasonableness Test .36-.48

Expectation Formation (Phase I) .37-.40

Inherent Precision of the Type of Expectation .41-.44

Identification, Investigation, and Evaluation (Phases II–IV) .45-.48

Example 4: Regression Analysis .49-.69

Cross-Sectional Regression .52-.58

Expectation Formation (Phase I) .59-.66

Identification, Investigation, and Evaluation (Phases II–IV) .67-.69

3 Case Study: On the Go Stores—continued Use of Regression in Review Engagements .70

Regression and Fraud Detection .71-.74

Reasonableness Testing by Store .75-.76

Appendix

A Measures of Precision for a Regression Analysis

B Financial Ratios

C Mapping and Summarization of Changes—Clarified Auditing Standards

D Schedule of Changes Made to the Text From the Previous Edition

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