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Analytical Procedures - AICPA Audit Guide

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Description

With Conforming Changes as of March 1, 2008

This Audit Guide provides the latest information on the use of analytical procedures when conducting audits. Updated with conforming changes as of March 1, 2008, it includes guidance in planning and performing audits under the risk assessment standards (SAS Nos. 104-111). This edition of the guide has also been conformed to reflect the Defining Professional Requirements standard (SAS No. 102).

The guide summarizes applicable requirements and practices, and delivers "how-to" advice for handling analytical procedures used in audits. The included case study illustrates the use of analytical procedures in planning and substantive testing, utilizing trend analysis, ratio analysis, reasonableness testing, and regression analysis. The appendices include a variety of examples of financial ratios and a comparison of the key provisions of the Risk Assessment Standards.

For a topical listing of subject matter by chapter, click on the Table of Contents tab.

Table of Contents

  • Chapter 1 — The Use of Analytical Procedures
    • Concepts and Definitions
      • Analytical Procedures
      • Expectations
      • Precision
      • Level of Assurance
    • Analytical Procedure Process: Four Phases
      • Expectation Formation (Phase I)
      • Identification and Investigation (Phases II and III)
      • Evaluation (Phase IV)
  • Chapter 2 — Questions and Answers
    • Precision of the Expectation
    • Relationship of Analytical Procedures to the Audit Risk Model
    • Evaluation and Investigation
    • Purpose of Analytical Procedures
    • Fraud
  • Chapter 3 — Case Study: On the Go Stores
    • Background Information
      • Nature of the Account or Assertion
    • Example 1: Trend Analysis
      • Expectation Formation (Phase I)
      • Planning Phase: Identification, Investigation, and Evaluation (Phases II through IV)
      • Substantive Testing: Identification, Investigation, and Evaluation (Phases II–IV)
    • Example 2: Ratio Analysis
      • Expectation Formation (Phase I)
      • Identification, Investigation, and Evaluation (Phases II–IV)
    • Example 3: Reasonableness Test
      • Expectation Formation (Phase I)
      • Inherent Precision of the Type of Expectation
      • Identification, Investigation, and Evaluation (Phases II–IV)
    • Example 4: Regression Analysis
      • Cross-Sectional Regression
      • Expectation Formation (Phase I)
      • Identification, Investigation, and Evaluation (Phases II–IV)
    • Use of Regression in Review Engagements
    • Regression and Fraud Detection
    • Reasonableness Testing by Store
  • Appendix A — Measures of Precision for a Regression Analysis
  • Appendix B — Financial Ratios
  • Appendix C — Major Existing Differences Between AICPA Standards and PCAOB Standards
  • Appendix D — Comparison of Key Provisions of the Risk Assessment Standards to Previous Standards
  • Appendix E — Schedule of Changes Made to the Text From the Previous Edition

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Excerpts

Purpose and Applicability

In 1988, the Auditing Standards Board (ASB) issued Statement on Auditing Standards (SAS) No. 56, Analytical Procedures (AICPA, Professional Standards, vol. 1, AU section 329). This AICPA Audit Guide has been prepared to provide practical guidance to auditors on the effective use of analytical procedures. Specifically, this guide includes a discussion of SAS No. 56; concepts and definitions; a series of questions and answers; and a case study illustrating trend analysis, ratio analysis, reasonableness testing, and regression analysis. Throughout this guide, SAS No. 56 is referred to as AU section 329. (See "References to Professional Standards" for further information regarding referencing in this guide.)

This guide also includes illustrations that demonstrate the importance of forming expectations and considering the precision of the expectation, two of the most misunderstood concepts from AU section 329. The concepts discussed are applicable for all three stages of the audit (planning, substantive testing, and review). However, this guide focuses principally on how the concepts are applied to substantive testing because in designing substantive procedures, auditors ordinarily desire a specified level of audit assurance.

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Paperback 2008
Product# 012558
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