ISA 520 DEALS with the auditor’s USE of analytical procedures as substantive procedures (‘Substantive Analytical Procedures’).
Table of Contents
- ISA 520 – Introduction
- ISA 520 – Objectives
- ISA 520 – Definition
- ISA 520 – Requirements
ISA 520 – Introduction
1. Scope of this ISA
It also deals with the auditor’s responsibility to perform analytical procedures near the end of the audit that assist the auditor when forming an overall conclusion on the financial statements.
ISA 315 (Revised) deals with the use of analytical procedures as ‘RISK Assessment Procedures‘.
2. Effective Date
This ISA is EFFECTIVE for audits of financial statements for periods beginning on or after December 15, 2009.
ISA 520 – Objectives
The objectives of the ‘auditor’ are:
- To obtain relevant and reliable audit evidence when using substantive analytical procedures; AND
- To design and perform analytical procedures near the end of the audit.
ISA 520 – Definition
1. Analytical Procedures
Evaluations of ‘Financial Information‘ through analysis of PLAUSIBLE relationships among both financial and non-financial data.
ISA 520 – Requirements
1. Substantive Analytical Procedures
When designing and performing substantive analytical procedures, EITHER alone or in combination with tests of details as substantive procedures in accordance with ISA 330, the ‘auditor’ shall:
|(a) DETERMINE the suitability of particular substantive analytical procedures for given assertions;|
|(b) EVALUATE the reliability of data from which the auditor’s expectation of recorded amounts or ratios is developed;|
|(c) DEVELOP an expectation of recorded amounts or ratios; AND|
|(d) DETERMINE the amount of any difference of recorded amounts from expected values that is acceptable.|
2. Analytical Procedures that Assist When Forming an Overall Conclusion
The auditor shall DESIGN and PERFORM analytical procedures near the end of the audit that assist the auditor when forming an overall conclusion as to whether the financial statements are consistent with the auditor’s understanding of the entity.
3. Investigating Results of Analytical Procedures
If analytical procedures performed in accordance with this ISA identify fluctuations or relationships that are inconsistent with other relevant information or that differ from expected values by a significant amount, the ‘auditor’ shall INVESTIGATE such differences by:
- INQUIRING of management and obtaining appropriate audit evidence relevant to management’s responses; AND
- PERFORMING other audit procedures as necessary in the circumstances.
The International Standard on Auditing ISA 520 ‘Analytical Procedures’ DEALS with the auditor’s USE of analytical procedures as Substantive Procedures.
[500-599] Audit Evidence → Articles @ EntreprenurialHub by Jhanzayb
Chartered Accountant (Institute of Chartered Accountants of Pakistan)
Bachelor of Accounting Honours (Asia e University, Malaysia)