Page 79 - CA Inter Bhaskar Vol 1

CA RAVI TAORI New Information which auditor was unaware
RISK ASSESSMENT AND INTERNAL CONTROL
AUDIT BHASKAR CH 03 - PART 01 (QNO- entity of which the auditor was unaware and may assist in assessing the risks of material
Analytical
Procedures
Analytical procedures performed as risk assessment procedures may identify aspects of the
315.06)
misstatement in order to provide a basis for designing and implementing responses to the
assessed risks.

Financial as well as non-f nanciali
Analytical procedures performed as risk assessment procedures may include both financial and
non-financial information, for example, the relationship between sales and square footage of
selling space or volume of goods sold.

Unusual Items
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.

However, when such analytical procedures use data aggregated at a high level (which may be the
situation with analytical procedures performed as risk assessment procedures), the results of
those analytical procedures only provide a broad initial indication about whether a material
misstatement may exist.

Results of Analytical Procedures & Other Information will be helpful
Accordingly, in such cases, consideration of other information that has been gathered when
identifying the risks of material misstatement together with the results of such analytical
procedures may assist the auditor in understanding and evaluating the results of the analytical
procedures.

Observation Observation and inspection may support inquiries of management and others and may also provide
and Inspection information about the entity and its environment.
(QNO-
315.06.50)
Examples of such audit procedures include observation or inspection of the following:
The entity's premises and plant facilities.
The entity's operations.
Documents (such as business plans and strategies), records, and internal control manuals.
Reports prepared by management (such as quarterly management reports and interim financial
statements) and those charged with governance (such as minutes of board of directors'
meetings).

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