Guide to Using International Standards on Auditing in - IFAC

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<strong>Guide</strong> <strong>to</strong> <strong>Using</strong> <strong>International</strong> <strong>Standards</strong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts
CONSIDER POINT
Do not confine your questions (especially in smaller audits) <strong>to</strong> the owner-manager and the accountant.
Ask other employees (if any) in the entity (such as the sales manager, production manager, or other
employees) about trends, unusual events, major business risks, the functioning of internal control, and
any instances of management override.
If a possible fraud involving senior management or those charged with governance is discovered,
consult immediately with the engagement partner, and consider obtaining legal advice on how <strong>to</strong>
proceed. The information should also be kept confidential <strong>to</strong> ensure that privacy and confidentiality
requirements are properly followed. Also check the code of ethics for any additional requirements and
guidance.
8.5 Analytical Procedures
Analytical
Procedures
Analytical procedures used as risk assessment procedures help <strong>to</strong> identify matters that have financial
statement and audit implications. Some examples are unusual transactions or events, amounts, ratios, and
trends.
In addition <strong>to</strong> being a risk assessment procedure, analytical procedures can also be used as further audit
procedures in:
• Obtaining evidence about a financial statement assertion. This would be a substantive analytical
procedure and is discussed in further detail in Volume 1, Chapter 10 of this <strong>Guide</strong>; and
• Performing an overall review of the financial statements at, or near, the end of the audit.
Most analytical procedures are not very detailed or complex. They often use data aggregated at a high level,
which means the results can only provide a broad initial indication about whether a material misstatement
may exist.