8.3: Burlingham Bees
Using Analytical Procedures as Substantive Tests

Using Analytical Procedures as Substantive Tests

1. The requirements related to developing an expectation and conducting analytical procedures when those procedures are intended to provide substantive evidence is provided by the reorganized Audit Standard 2305 Substantive Analytical Procedures effective December 31, 2016 in the following list: a. “Analytical procedures are an important part of the audit process and consist of evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data. Analytical procedures range from simple comparisons to the use of complex models involving many relationships and elements of data. A basic premise underlying the application of analytical procedures is that plausible relationships among data may reasonably be expected to exist and continue in the absence of known conditions to the contrary. Particular conditions that can cause variations in these relationships include, for example, specific unusual transactions or events, accounting changes, business changes, random fluctuations, or misstatements (Public Company Accounting Oversight Board, AS 2305.02).” b. “Analytical procedures are used as a substantive test to obtain evidential matter about particular assertions related to account balances or classes of transactions. In some cases, analytical procedures can be more effective or efficient than tests of details for achieving particular substantive testing objectives (PCAOB, AS 2305.04).” c. “Analytical procedures involve comparisons of recorded amounts, or ratios developed from recorded amounts, to expectations developed by the auditor. The auditor develops such expectations by identifying and using plausible relationships that are reasonably expected to exist based on