1.

ANALYTICAL PROCEDURES
Analytical procedures are defined as an evaluation of financial information by studying plausible relationships among both
financial and non-financial data.
1.1. Comparisons
Comparisons can be made between account balances for current year and prior year, current year and budget. When
comparing account balances from one year to the next, significant changes can be tracked and investigated further by the
auditor. Auditor will assess theses changes in light of their expectations based on their understanding of the client and
changes experienced over the past year. When comparing account balances with budget, significant uncovering
variations between actual and the budgeted are discussed with client personnel.
1.2. Trend analysis
Trend analysis (horizontal analysis) involves comparing account balances over time, by selecting a base year and then
restating all accounts in subsequent years as a % of that base. It allows the auditor to gain a deeper appreciation of how
various accounts have changed through time. It is important to consider economy wide factors when doing analysis of
the trend.
1.3. Common-size analysis
Common-size analysis (vertical analysis) involves comparing account balances to a single line item (asset, revenue). It
allows the auditor to gain a deeper appreciation of how much each account contributes to the totals presented in FR.
Common-size for a number of years can help auditor to trace the relative contribution of accounts through time.

1.4. Ratio analysis

Ratio analysis is to assess the relationship between various account balances.
The auditor will make comparisons between current year to previous year, to budget or competitors of a similar sizes
operating in the same industry. Any material changes are investigated further as there may be a risk of material
misstatements. This include fluctuations where none were expected and no fluctuations where were expected.