Page 82 - CA Final PARAM Digital Book.

Part 6- SA 520

QNO Analytical Procedures (Considerations) Old Course – (M09E, N13R, PM17)
71.000 TITANIUM CNO--SA520.040
What are the considerations to be kept in mind while performing substantive analytical procedures

on data prepared by the client?
Answer Part I -- Relevant Standards & Laws
▪ SA 520, “Analytical Procedures”

Part II -- Requirements of Relevant Standards & Laws
➢ Factors to be kept in mind while performing analytical procedures
• Suitability of particular substantive analytical procedures for given assertions /
Reliability of data to be used to develop expectations / Develop expectations
sufficiently precise /Determine differences from recorded values and evaluate
whether investigations are required. Inquiry & Other Audit procedures can be used
for investigations
As per “SA 520 (Revised) Analytical Procedure”, when the auditor intends to perform
analytical procedures on data prepared by the client, he should consider the following:
• Determine the suitability of particular substantive analytical procedures for given
assertions, taking account of the assessed risks of material misstatement and tests
of details, if any, for these assertions;
• Evaluate the reliability of data from which the auditor’s expectation of recorded
amounts or ratios is developed, taking account of source, comparability, and nature
and relevance of information available, and controls over preparation;
• Develop an expectation of recorded amounts or ratios and evaluate whether
the expectation is sufficiently precise to identify a misstatement that, individually
or when aggregated with other misstatements, may cause the financial statements
to be materially misstated; and
• Determine the amount of any difference of recorded amounts from expected
values that is acceptable without further investigation and if analytical procedures
performed in accordance with this SA 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:
o Inquiring of management and obtaining appropriate audit evidence
relevant to management’s responses; and
o Performing other audit procedures as necessary in the circumstances.

QNO Analytical Procedures (Investigating Inconsistencies) Old Course – (N18E)
73.100 TITANIUM CNO--SA520.060
In audit of DEF Limited, the Auditor had made use of certain analytical procedures with regard to certain
key data in the Statement of Profit and Loss. The results obtained showed inconsistencies with other

relevant information. State the course of action that the Auditor should take to ensure that the risk
of material misstatement would be contained to a low level fixed as per materiality level.
Answer Part I -- Relevant Standards & Laws
▪ SA 520, “Analytical Procedures”

Part II -- Requirements of Relevant Standards & Laws
➢ Investigating Results of Analytical Procedures:
• Analytical Procedures will help identify fluctuations.
As per SA 520, “Analytical Procedures”, if analytical procedures performed in accordance
with this SA 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:

• 2 Ways of investigating.
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