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analytical procedure

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Swati asked over 2 years ago

1. write short note on analytical procedure? 2.what are the considerations to be ept in mind while performing analytical procedure on data prepared by the client.

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Open uri20170510 32134 1c996lj?1494421732 Anil answered over 2 years ago

Analytical procedures include comparison of financial information (data in financial statement) with 1.prior periods 2.budgets 3.forecasts 4.similar industries and so on. It also includes consideration of predictable relationships, such as: 1.gross profit to sales, 2.payroll costs to employees, 3.financial information and non-financial information, for examples the CEO's reports and the industry news.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 CA Sandeep Bohra answered over 2 years ago

> analytical procedure --Analytical procedures are an important type of evidence on an audit. They involve a comparison of recorded values with expectations developed by the auditor. They consists of evaluations of financial information made by a study of plausible relationships among both financial and non financial data. --Analytical procedures are an important type of evidence on an audit. They involve a comparison of recorded values with expectations developed by the auditor. They consists of evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data. For example, the current-year accounts receivable balance can be compared to the prior-years' balances after adjusting for any increase or decrease in sales and other economic factors. **What are the considerations to be ept in mind while performing analytical procedure on data prepared by the client.** --SA 520 “Analytical Procedures” deals with the auditor’s use of analytical procedures as substantive procedures. Accordingly, auditor is required to consider the following while performing analytical procedures: (a) Determine the suitability of particular substantive analytical procedures: Suitability of Analytical Procedures is influenced by: 1. Nature of assertion. 2. Auditor’s assessment of Analytical Procedures effectiveness to identify material misstatement. 3. In some cases unsophisticated predictive models may be useful. 4. Different types of Analytical Procedures provide different levels of assurance. (b) Evaluate the reliability of data: Following factors affects the reliability: 1. Source of information available. 2. Comparability of information available. 3. Nature & relevance of information available. 4. Controls over preparation of information that are designed to ensure Completeness, accuracy & validity. (c) Develop an expectation of recorded amounts or ratios and evaluate whether the expectation is sufficiently precise to identify material misstatement. (d) Determine the amount of any difference of recorded amounts from expected values that is acceptable without further investigation.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Anil Dhawan answered over 2 years ago

Analytical procedures are one of many financial audit processes which help an auditor understand the client's business and changes in the business, and to identify potential risk areas to plan other audit procedures. Analytical procedures include comparison of financial information (data in financial statement) with 1.prior periods 2.budgets 3.forecasts 4.similar industries and so on. It also includes consideration of predictable relationships, such as: 1.gross profit to sales, 2.payroll costs to employees, 3.financial information and non-financial information, for examples the CEO's reports and the industry news. possible sources of information about the client include: 1.interim financial information 2.Budgets 3.Management accounts 4.Non-Financial information 5.Bank and cash records 6.VAT returns 7.Board minutes 8.Discussion or correspondence with the client at the year-end

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Aarti Vadnerkar answered over 2 years ago

Analytical procedures" means the analysis of significant ratios and trends, including resulting investigation of fluctuations and relationships that are inconsistent with other relevant information or which deviate from predicted amounts. The purpose of this AAS is to establish standards on the application of analytical procedures during an audit. The AAS, accordingly, deals with aspects like nature and purpose of analytical procedures, analytical procedures in planning the audit, analytical procedures as substantive procedures, analytical procedures in the overall review at the end of the audit, extent of reliance on analytical procedures, investigating unusual items etc. The AAS is effective for all audits relating to accounting periods beginning on or after April 1, 1997.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 megha answered over 2 years ago

Hello, here is the answer of your query > **note on analytical procedure** Analytical Procedures: ---------------------- SA 520 “Analytical Procedures” deals with the auditor’s use of analytical procedures as substantive procedures. Meaning of Analytical Procedures: --------------------------------- Analytical Procedures means evaluations of financial information through analysis of relationships among both financial and non-financial data. It also encompass such investigation as is necessary of identified fluctuations or relationships that are inconsistent with other relevant information or that differ from expected values by a significant amount. Nature of Analytical Procedures: -------------------------------- (a) AP include the consideration of comparisons of the entity’s financial information with ------------------------------------------------------------------------ • Comparable information for prior periods. • Anticipated results of the entity, such as, budgets or forecasts, or expectations of the auditor. • Similar industry information. (b) AP also include consideration of relationships, among --------------------------------------------------------- • elements of financial information, such as gross margin percentages. • financial information and relevant non-financial information, such as payroll costs to number of employees ************************** ************************* > considerations to be kept in mind while performing analytical procedure on data prepared by the client. **Considerations to be kept in mind while performing Analytical Procedures:** ------------------------------------------------------------------------ SA 520 “Analytical Procedures” deals with the auditor’s use of analytical procedures as substantive procedures. Accordingly, auditor is required to consider the following while performing analytical procedures: (a) **Determine the suitability of particular substantive analytical procedures**: Suitability of Analytical Procedures is influenced by: 1. Nature of assertion. 2. Auditor’s assessment of Analytical Procedures effectiveness to identify material misstatement. 3. In some cases unsophisticated predictive models may be useful. 4. Different types of Analytical Procedures provide different levels of assurance. (b) **Evaluate the reliability of data: Following factors affects the reliability**: 1. Source of information available. 2. Comparability of information available. 3. Nature & relevance of information available. 4. Controls over preparation of information that are designed to ensure Completeness, accuracy & validity. (c) **Develop an expectation of recorded amounts or ratios and evaluate** whether the expectation is sufficiently precise to identify material misstatement. (d) **Determine the amount of any difference of recorded amounts from expected values** that is acceptable without further investigation.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Surbhi answered over 2 years ago

Analytical procedures are one of many financial audit processes which help an auditor understand the client's business and changes in the business, and to identify potential risk areas to plan other audit procedures. Analytical procedures include comparison of financial information (data in financial statement) with - prior periods - budgets - forecasts - similar industries and so on. It also includes consideration of predictable relationships, such as: - gross profit to sales, - payroll costs to employees, - financial information and non-financial information, for examples the CEO's reports and the industry news. possible sources of information about the client include: - interim financial information - Budgets - Management accounts - Non-Financial information - Bank and cash records - VAT returns - Board minutes Discussion or correspondence with the client at the year-end

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