Wiley Practitioner's Guide to GAAS 2015: Covering all SASs, SSAEs, SSARSs, PCAOB Auditing Standards, and Interpretations

AU-C 520 Analytical Procedures

AU-C ORIGINAL PRONOUNCEMENT

Original Pronouncement

Statements on Auditing Standards (SAS) No. 122.

AU-C DEFINITION OF TERM

Source: AU-C 520.04

Analytical procedures. Evaluations of financial information through analysis of plausible relationships among both financial and nonfinancial data. Analytical procedures 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.

OBJECTIVES OF AU-C SECTION 520

AU-C Section 520.03 states that:

… the objectives of the auditor are to

1. obtain relevant and reliable audit evidence when using substantive analytical procedures and
2. design and perform analytical procedures near the end of the audit that assist the auditor when forming an overall conclusion about whether the financial statements are consistent with the auditor's understanding of the entity.

How to Use Analytical Procedures

AU-C 315 addresses the use of analytical procedures in risk assessment when planning the audit, and AU-C330 addresses the nature, timing, and extent of procedures in response to assessed risk. Those procedures may include substantive analytical procedures.

As substantive procedures. The auditor may, but is not required to, use analytical procedures as a substantive test. When used as a substantive test, the objective of analytical procedures is to accumulate evidence supporting ...