Auditing & Assurance › Analytical Procedures
What is a substantive analytical procedure and when is it appropriate?
IntermediateAnswer
A substantive analytical procedure obtains evidence about an assertion by developing an expectation and comparing it to the recorded amount, investigating significant differences. It's appropriate when the relationship is plausible and predictable, data is reliable, and the expectation is precise enough to detect a material misstatement—often for large-volume, stable items like interest, payroll, or rent.
Expectation: Interest expense = average loan balance x rate
If recorded interest differs materially -> investigate.Real-world example The auditor estimates expected depreciation from asset cost and rates, then investigates the difference from the recorded figure.