Page 70 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
The auditor might deem the disclosure of estimation uncertainty to be insufficient, even when the disclosures
align with the applicable financial reporting framework. This conclusion is particularly relevant when there's a
substantial risk linked to an accounting estimate, and it is based on the specific circumstances and facts
involved.

(CNO-SA540.220) Step 6: - Written Representations:
The auditor shall obtain written representations from management and, where appropriate, those charged with
governance whether they believe significant assumptions used in making accounting estimates are reasonable.
Step 7:- Documentation of Accounting Estimates
Reasonableness: The basis for the auditor's conclusions on the reasonableness of accounting estimates and the
disclosure of significant risks.
Bias: Indicators of potential management bias, if present.

SA 520

ANALYTICAL PROCEDURES

NOTE: We have covered content which is given in CA Final Audit ICAI module. This SA is expected in detail in
Inter and in Final there is limited coverage. We will issue pdf for Inter based SAs, see QR code given in Ch 20.

(CNO-SA520.020) Analytical Procedures Prior To Audit as Well as Towards Finalization
When Designing and Performing Substantive Analytical Procedures (Execution)
Step 1 Suitability: Assess the suitability of specific substantive analytical procedures for certain assertions,
considering the risks of material misstatement and any tests of details for these assertions.
Step 2 Reliability of Data: Evaluate the trustworthiness of the data used to form the auditor's expectations of
recorded amounts or ratios. This involves considering the source, comparability, nature, and relevance of the
information, as well as the controls over its preparation.
Step 3 Develop an expectation: Develop an expectation of recorded amounts or ratios, and determine if this
expectation is accurate enough to identify a misstatement that could materially misstate the financial
statements, either on its own or when combined with other misstatements.
Step 4 Differences: Establish the level of acceptable differences between recorded amounts and expected
values that do not necessitate further investigation, as per the requirements.

(CNO-SA520.040) Analytical Procedures That Assist When Forming an Overall Conclusion (Finalisation)
1A. Mandatory: The auditor must design and perform analytical procedures towards the end of the audit.
1B. Assistance in Overall Conclusion: These procedures assist the auditor in forming an overall conclusion
on the consistency of the financial statements with their understanding of the entity.
2A. Verify the conclusions: The conclusions drawn from these procedures verify the conclusions reached
during the audit of individual components or elements of the financial statements.
2B. Risk Identification: The results of the analytical procedures may reveal previously unidentified risks of
significant misstatements. In such cases, the auditor must reassess the risks of material misstatement and adjust
their planned audit procedures accordingly.
3. Procedure Similarity: The analytical procedures conducted for this purpose may be similar to risk
assessment procedures. (Planning stage)

(CNO-SA520.060) Investigating Results of Analytical Procedures
1. Inconsistencies or Significant Deviations: When analytical procedures under SA 520 identify
inconsistencies or significant deviations from expected values, the auditor must investigate these differences.
2A. Inquiry: The investigation involves inquiry of management and gathering relevant audit evidence related

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