Analytical procedures (finance auditing)


Analytical procedures are one of many financial audit processes which help an auditor understand the client's business and changes in the business, and to identify potential risk areas to plan other audit procedures.

Use and stages

Analytical procedures are performed at three stages of audit: at start, in middle and at end of audit. These three stages are risk assessment procedures, substantive analytical procedures, and final analytical procedures.
Analytical procedures include comparison of financial information with prior periods, budgets, forecasts, similar industries and so on. It also includes consideration of predictable relationships, such as gross profit to sales, payroll costs to employees, and financial information and non-financial information, for examples the CEO's reports and the industry news. Possible sources of information about the client include interim financial information, budgets, management accounts, non-financial information, bank and cash records, VAT returns, board minutes, and discussion or correspondence with the client at the year-end.