808

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Author:
Kshowalter
ID:
57655
Filename:
808
Updated:
2011-01-01 16:59:48
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Anaylitc Procedures
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808
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  1. Purpose of Analytical Procedures

    808.1 SAS No. 56 (AU 329), Analytical Procedures,
    as amended, requires the use of analytical procedures in the final
    review stage of the audit. The purpose of analytical procedures at this
    stage is to identify any unusual or unexpected financial statement
    relationships not previously identified
    • and to assess whether the information gathered during the audit provides
    • a sufficient understanding of such relationships identified during the
    • planning or final review stages. The auditor assesses whether the
    • financial statements make sense in light of the knowledge and
    • understanding obtained during the audit. When the auditor does not have a
    • sufficient understanding of the cause of an unusual or unexpected
    • relationship, additional procedures may have to be applied.
  2. 808.2 Preliminary analytical
    procedures are risk assessment procedures performed to obtain an
    understanding of the entity and its environment for the purpose of
    assessing the risks of material misstatement and determining what
    further audit procedures should be performed in response to the risk
    assessment.
    • Final review analytical procedures
    • are used to consider the adequacy of the procedures performed. Although
    • the objective of applying the procedures may differ, the analytical
    • procedures actually applied may be very similar or identical. At the
    • planning stage, analytical procedures will be applied to unaudited
    • amounts. In the final review stage, the procedures will be applied to
    • amounts after audit adjustment. Thus, in the final review, a simple
    • comparison to prior period amounts at the financial statement level is
    • normally effective.
  3. 808.3 One common form of documentation is referred to as a flux analysis.
    • A flux analysis is a narrative
    • explanation by financial statement caption (line item) of the change in
    • the amount from the prior period and of any unusual or unexpected
    • relationships to other financial statement line items in the current
    • period. The authors do not believe a flux analysis is required by SAS
    • No. 56, but recommend it as a convenient means of documenting the
    • thought process that is required by the SAS
  4. 808.4 As discussed in Chapter 6, SAS No. 99 (AU 316), Consideration of Fraud in a Financial Statement Audit,
    requires the auditor to perform preliminary analytical procedures
    related to revenue to identify unusual or unexpected relationships that
    may indicate fraudulent financial reporting.
    • Those procedures should be performed through the end of the reporting
    • period. If the full year's information is available during audit
    • planning, the required procedures can be performed during preliminary
    • analytical procedures. Otherwise, the analytical procedures related to
    • revenue performed during planning should be updated during the final
    • analytical review stage of the audit.
  5. 808.5 Examples of analytical
    procedures and guidance on evaluating the results of analytical
    procedures are included in section 702.
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