All 18 Analytical Procedures questions
More in Analytical Procedures
What is trend analysis? How do analytical procedures help in risk assessment (planning)? What is the difference between analytical procedures and tests of details in simple terms? What is a substantive analytical procedure and when is it appropriate? How do you investigate significant fluctuations found by analytical procedures? Why is disaggregation important in analytical procedures? What are the limitations of analytical procedures? What is the required analytical review at the final/completion stage? When are analytical procedures more effective than tests of details, and vice versa? What is the difference between the precision and reliability of an analytical procedure?
Advertisement
Auditing & Assurance › Analytical Procedures

How do you develop an expectation for analytical procedures?

Intermediate

Answer

Build the expectation from reliable, independent data and known relationships—prior-period results adjusted for known changes, budgets tested for reasonableness, non-financial data (units, headcount, floor space), and industry trends. The more precise and independent the expectation, the more effective the procedure at detecting misstatement.
Real-world example Expected revenue is built from units sold times average price, using operational data independent of the accounting records.

Common follow-ups: Why use non-financial data? | Why must the expectation be independent?

Audit Evidence & Procedures Audit Risk & Materiality Analytical Procedures
All 18 Analytical Procedures questions