Engagement Essentials

Chapter 8 INQUIRY AND ANALYTICAL REVIEW PROCEDURES

LEARNING OBJECTIVES

After completing this chapter, you should be able to do the following:

•     Recognize the purpose and types of analytical review procedures.

•     Identify the process for performing analytical review procedures.

•     Identify inquiries common to review engagements.

•     Recall the documentation requirements for inquiry and analytical review procedures.

Analytical Procedures

Accountants performing review engagements are required to perform an analytical review of the financial statements. Note that the use of analytical procedures in a review differs from an audit. In an audit, analytical procedures are required in planning and the overall review stage, and may be used as a substantive procedure. The primary purpose of analytical review is to ascertain whether there are relationships within and among the financial statements that appear unusual. Understanding the financial and nonfinancial relationships is, therefore, essential in evaluating the results of analytical procedures and generally requires knowledge of the client and its industry. Further, the identification of the relationships and types of data used, as well as conclusions reached, regarding the analytics requires the exercise of the accountant's professional judgment. The results of analytical procedures that identify unusual relationships may also require further inquiry.

DEFINING ANALYTICAL PROCEDURES

Analytical procedures are those ...