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Great expectations

Substantive analytical procedures can be a powerful tool for skilled and sceptical auditors who can avoid common deficiencies, Emma McDonough and Jon Morris explain how.

Substantive analytical procedures can be difficult to do well. For many years they have been identified as an area of weakness across the audit profession in audit monitoring and inspection reports across the world.

There are many possible reasons for this, as the ICAEW Quality Assurance Department notes that not all firms fully appreciate the difference between substantive analytical procedures (an evidence-gathering process) and the higher-level analytical review procedures used at the preliminary and completion stages of the audit.

There are signs that auditors are becoming more cautious about their use of substantive analytical procedures and recognising the considerable time and effort required to do them properly. However, determining whether substantive analytical procedures are suitable and performing them effectively remain challenging. This begs the question ‘Is there still a place for substantive analytical procedures in an audit?’ and this was the subject of our recent external lecture and webinar for faculty members.

This is an extract from an article in the July/August 2016 edition of Audit & Beyond, the magazine of the Audit and Assurance Faculty.

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