ABSTRACT
Analytical procedures (APs) refer to a family of relatively inexpensive, expectation-based evidence-gathering tools available to an external auditor to efficiently provide assurance on a client’s financial statements. In essence, APs consist of comparing a reported numeric value, such as an account balance or ratio, with an expected value to determine whether the account balance or ratio appears reasonable (PCAOB 2010a: AU 329). APs also encompass investigations, as is necessary, of identified fluctuations or relationships that differ from expected values by a significant amount (IAASB 2009: ISA 520). As an example, to test the reasonableness of an account balance such as commission expense, an auditor may compare the balance to an expected amount computed by multiplying audited sales by the average commission rate.
