Analytical review procedures

Analytical review procedures are the methods of deriving information by studying and comparing relationship among data.

There are five types of such procedures:

1. Comparison of the financial information with information for comparable prior periods.
2. Comparison of the financial information with anticipated results (e.g., budgets and forecasts).
3. Study of the relationship of elements of financial information that would be expected to conform to a predictable pattern based on the entity’s experience.
4. Comparison of the financial information with similar information regarding the industry in which the entity operates.
5. Study of relationship of the financial information with relevant nonfinancial information.

In the planning stage, analytical review procedures are used to identify potential problem areas so the audit work can be planned to reduce the risk of missing something important.

VI. Read and translate the text. Say what risks an auditor must consider and what each type of the risks involve.