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CA Ravi Taori
information will assist the auditor in determining the nature, timing and extent of his other audit
procedures.

➢ Analytical procedures in planning the audit use both financial data and nonfinancial information,
such as number of employees, square feet of selling space, volume of goods produced and similar
information.

➢ For example, analytical procedures may help the auditor during the planning stage to determine
the nature, timing and extent of audit procedures that will be used to obtain audit evidence for
specific account balances or classes of transactions.

QNO-- Analytical Procedures as Risk Assessment Procedures & Sole Reliance on New Course – (J25M)
them for Opinion
520.03.60
Bhaskar CNO – SA520.080
CA Srishti, while auditing KSM Private Limited for the first time, utilised software to analyse financial data,
comparing amounts recorded in the financial statements for the current audit year with the preceding two
years. Her objective was to evaluate the risk of material misstatement.

Identify the type of audit procedure performed by CA Srishti in the given case, discuss its relevance, and
explain whether an auditor’s opinion can solely rely on such procedures.
Answer In the given case, CA Srishti is performing analytical procedures as risk assessment procedures.

Analytical procedures performed as risk assessment procedures may identify aspects of the entity of
which the auditor was unaware and may assist in assessing the risks of material misstatement in order to
provide a basis for designing and implementing responses to the assessed risks. Analytical procedures
performed as risk assessment procedures may include both financial and non-financial information.

Analytical procedures may help identify the existence of unusual transactions or events, and amounts,
ratios, and trends that might indicate matters that have audit implications. Unusual or unexpected
relationships that are identified may assist the auditor in identifying risks of material misstatement,
especially risks of material misstatement due to fraud.

Risk assessment procedures are a basis for the identification and assessment of risks of material
misstatement at the financial statement and assertion levels Risk assessment procedures by themselves,
however, do not provide sufficient appropriate audit evidence on which to base the audit opinion.

Thus, it can be concluded that auditor’s opinion cannot be solely based upon such procedures.

QNO SUBSTANTIVE ANALYTICAL PROCEDURES – STEPS Old Course – (M20R/N22R/N23R/N20E)
520.04 Bhaskar CNO - SA520.100
When designing and performing substantive analytical procedures, either alone or in combination with
tests of details, as substantive procedures in accordance with SA 330, the auditor shall 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. Explain the other
relevant points in this context.
OR
Explain the aspects to be considered by an auditor when designing and performing substantive
analytical procedures, either alone or in combination with test of details, as substantive procedures
in accordance with SA 330.
Answer ➢ When designing and performing substantive analytical procedures, either alone or in combination
with tests of details, as substantive procedures in accordance with SA 330, the auditor shall:

• 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;
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