Important questions

Q. No. 1: Analytical procedures use comparisons and relationships to assess whether account balances
other data appear reasonable. Explain stating the purpose of analytical procedures with
examples.
Q. No. 2: Give examples of Analytical Procedures having [RTP-May 18
consideration of comparisons of the entitys
financial information.
Q. No. 3: Routine checks cannot be depended upon to RTP-Nov. 19|
disclose the mistakes or mnanipulation that may
all
exist in accounts, certain other procedures also have to be
applied like trend and ratio analysis
Analyse and explain stating clearly the meaning of analytical procedures. [RTP-Nov. 191
Q. No. 4: In the planning stage, analytical
procedures assist the auditor in understanding the client's
business and in identifying areas of potential risk. Explain.
Q. No. 5: For the purposes of the SAs, the term RTP-Nov. 20, MTP-Nov. 21]
"analytical procedures" means evaluations of financial
information through analysis of plausible relationships among both financial and non-financial
data. Explain giving examples of both.
Q. No. 6: Whether it is possible to [RTP-Nov. 21)
independently verify the
incduded in the statement of profit and loss? Explaincorrectness of some of the items of expenses
with the help of some examples.
Answer: Often it is possible to independently verify the [Dec. 21 (3 Marks)
the Statement of Profit and Loss. correctness of some of the items of expenses inciuaeu
For instance, the cost of importing goods
be verified from the amount of which are subjected to an ad valorem dutyat
duty paid. Similarly, a quantity of uniform rae
independentiy from the amount of excise duty/GST paid. sugar sold by sugar mill can be ve
Similariy, the amount of any income or expenses
profits or that of sales can be which has a direct relationship with the
verified anu
the basis of net profits, independently, e.g., commission paid to a
commission paid to aselling agent as percentage of
calculatedor
manager calculationof
ratios, trends and comparisons is also termed as sales, etc. Such
Thus, it is important to note that analytical review.
transactions or eventS, and amounts,Analytical
unusual
procedures
ratios, and trends thatmay might indicate thematters
help identify that ofhave audt
existence
imolications.
risks of material
Unusual or unexpected
relationships that are identified may assist identifjyig
ini
misstatement, especially risks of material the auditor
misstatement due to fraud.
8.2
Chapter8 Analytical Procedures
No 7: Tree Limited presented its financial statements for the F.Y. 2022-23 to its auditor for expressing
an opinion thereon. The auditor while carrying out the audit started comparing various items of
profit and loss account of the year under audit with previous financial years. What is auditor
trying to achieve by carrying out those comparisons? [May 22 (4 Marks)]
Purpose of Applying Analytical Procedure:
AnalyticaB procedures use comparisons and relationships to assess whether account balances or other
data appear reasonable.
The auditor of Tree Ltd. would achieve the following by carrying out the comparison stated in the
question:
0 If balances inciuded in the Statement of Profit and Loss of an entity are compared with those
contained in the Statement of Profit and Loss with that of the previous period, it would be possible
to find out the reasons for increase or decrease in the amount of profits of those years.
() By setting up certain expenses' ratios on the basis of balances included in the Statement of Profit
and Loss, for the year under audit, comparing them with the same ratios for the previous year, it is
possible to ascertain the extent of increase or decrease in various items of expenditure in relation to
sales and that of trading profit in relation to sales.
(ii) lf differences are found to be material, the auditor would ascertain the reasons thereof and assess
whether the accounts have been manipulated to inflate or suppress profits.
(iv) It would be possibie to identify the existence of unusual transactions, amounts, ratios and trends
that might indicate matters that have audit implications.
Q. No. 8: As per the Standard on Auditing (SA) 520 "Analytical Procedures", what are the examples of
analytical procedures having consideration of relationships? [Nov. 22 (3 Marks)]
 Important Questions
Q. No. 9: The reliability of data in influenced by its source and nature and is dependent on the
circumstances under which it is obtained. Accordingly, what are the relevant criteria which
determine whether the data is reliabie for the purposes of designing substantive analytical
procedures? [MTP-March 18]
Or

CA A, auditor of ABC Ltd. wants todesign substantive analytical procedure and for that he wants
to check whether the data is reliable or not. Mention the relevant points which he has to consider
whether data is reliable for purpose of designíng the substantive analytical procedures.
[Nov. 19 (3 Marks)]
8.5
Analvtical Procedures
Or
Chapter 8
Discuss with examples the factors that are relevant when determining whether data s rellahl
purposes ofdesigning substantive analyttcal procedures. (RTP-Nov. 22)
Q.No. 10: Discussthetechniques avallable as substantive analytical procedures. (May 18 (S Marks)l
Or
Explain the techniques available as Substantive Analytical procedures. Jan. 21 (3Marks)
Or

while applying the Substantive Analytical Procedures what techniques can be used by the
statutory auditor of a company to obtain sufficient and approprlate audit evidence?
[MTP-March 22)
Q. No. 11: Explain the commonly used technique in the comparison of current data with the prior perlod
balance or with a trend in two or more prior period balances.
Q.No. 12:The decision about which audit procedures to perform, including whether to
[RTP-May 20)
use substantive
analytical procedures, is based on the auditor's judgment. Explain.
[RTP-Nov. 20
Q. No. 13:With respect toSA 520"Analytical procedures". Explain the
following factorsto be considered by
the auditor for substantive audit procedures.
) Account type (ii) Predictability (iii) Nature of Assertion.
Q. No. 14: Analysis by computationof ratios includes the [Nov. 20 (3 Marks)
study of relationships between fnancial statement
amounts. State Commonly used ratios.
. No. 15: Substantive analytical [RTP-Nov. 21)
procedures are generally more applicable to large volumes of
that tend to be predictable over time.
Explain. transactions
Q. No. 16:Discuss the matters
relevant to
[MTP-April 22|
the auditor's
developed sufficiently precsely to identify a evaluation of whether the expectation can be
misstatement that, when aggregated with other
misstatements, may cause the financial statements to be materially
Q. No. 17:Explain the aspects to be misstated. (RTP-May 22)
considered by an
analytical procedures, either alone or in auditor when designing and performing substantive
procedures in accordance with SA 330. combination with test of details, as substantve
RTP-Nov. 22
8.3 Miscellaneous Topics
 Important Questions
0. No. 18:The relationships between individual fnancial statements tems traditionally considered in the
audit of business entities may not always be relevant in the audit of governments or other non
business public sector entities, Analyse and Explain. RTP-Nov, 18
QNo. 19: The statutory auditor of ABC Ltd., CA Raj identfes certaln inconsistencies while applylng
analytical procedures to the flnanctal and non-fnancial data ofABC Ltd. With reference to SA S20
on"Analyttcal Procedures" how CA Raj shall investigate such differences? July 21 (3 Marks))
Or

If analytlcal procedures performed in accordance with SA 520 identify fluctuations or

relationships that are inconsistent with other relevant infomation or that differ from expected
investigate such ifferences,
values by a significant amount, explain how would the auditor
RTP-May 22]

Correct/Lncorrect)
ObjectiveType Questions (True/False,
throngh
1 procedures means evaluations offinancial information
AS per SA 520 the term "analytical
among financial data only.
aysis of plausiblerelatlonships
Ans.: Statement is incorrect.
Procedures" defines the term analytical procedures as evaluations of financial
SA 520 "Analytical relationships among both financial and
non-financial
information through analysis of plausible
data.
the mistakes or manipulation that may exist in
2 checksto disclose all
Auditor can depend on routine
accounts.
Abs,: Statement is incorrect.
depended on routine checksto disclose all the mistakes or manipulation that
Auditor cannot be
may exist in accounts.
8.7
 Analytical Procedures
Chapter
Certain other procedures like trend and ratio analysis also have to be applied in addition to routi
checks.
3 Only purpose of analyticalprocedures is to obtain relevant and rellable audit evidence when usin
substantive analytical procedures.
Ans.: Statement is incorrect.
Analytical procedures are being applied:
(a) To obtain relevant &reliable audit evidence when using substantive analytical procedures; and
(b) To design and perform analytical procedures near the end of the audit that assist the auditor when
forming an overallconcusion as to whether the F.S. are consistent with auditor's understanding t
the entity.
Analytical Procedures are required in the planning phase only.
Ans.: Statement is incorrect.
Analytical Procedures are applied not only during planning phase but also applied:
" during the audit; and
near the completion of audit.
5 Ratio analysis is useful in analyzing revenue and expense account only.
Ans.. Statement is incorrect.
Ratio analysis is useful for analysing asset and liability accounts as well as
revenue and expense
accounts.
6
Reasonableness test rely only on the events of the prior period like other analytical procedures.
Ans.: Statement is incorrect
Unlike trend analysis, Reasonableness test does not rely on events of
financial data for the audit period under consideration. prior periods, but upon non
7 The statutory auditor of the company can apply
analytical procedures to the standalone financial
statementsof a company only and not to the consolidated financial
statements.
Ans.: Statement is incorrect.
Analytical procedures may be applied to consolidated
elements of information. financial statements, components and individual
Substantive analytical procedures are generally less applicable to large
tend to be predictable over time. volumes of transactions that
Ans.: Statement ís incorrect. [MTP-Aug 18
" As per SA 520
"Analytical Procedures" substantive analytical
when an account balance or procedures are more approprate
relationships between items of data
relationship is one that may reasonably be expected to exist and are predictable. A predictabie
10 Analytical procedures are unable to help the auditor in continue over time.
other auditprocedures at the planning stage. detenining nature, timing and extent ot
[Nov, 09 (2 Marks)l
Ans.: Statement is incorrect.

Analytical procedures are applied during planning stage and

hence helps the auditor
determining nature, túming and extent of other audit procedures.
procedures during planning is governed by SA 315. Application of Analyue

8.8
Chapter
&
Analytical Procedures
SA 520 "Analytical Procedures" deals with the auditor's use of analvtical procedures as substantive
procedures ("substantive analytical procedures"), and as procedures near the end of the audit that
assist the auditor when forming an overallconclusion on the financial statements.
nalytical procedure is a part of routine audit checkng. May 17 (2 Marks)]
Ans.: Statement is incorrect.
SA 520 "Analytical Procedures" defines the term analvtical procedures as evaluations of financial
information through analysis of plausible relationshis among both financial and non-financial
data.
Auditor cannot be depended on routine checks to disclose all the mistakes or manipulation that
may exist in accounts. Certain other procedures like trend and ratio analysis also have to be
appliea
in addition to routine checks.
accounting periods
12 Amodelling tool constructs a statistical model from financial data only of prior
MTP-March 18, March 19
to predict current account balances.
Ans.: Statement is incorrect.
non-financial data of prior
A modelling tool constructs a statistical model from financial and/or
accounting periods to predict current account balances.
inherent risk or"what can go wrong, auditor should
13 While designing audit procedures to address an if a substantive
to determine
consider the nature of the risk of material misstatement in order
[MTP-March 18, Oct. 18, March 19]
analytical procedure can be used to obtain audit evidence.
Ans.: Statement is correct.
or "what can go wrong", auditor
While designing audit procedures to address an inherent risk
misstatement in order to determine if a
should consider the nature of the risk of material
evidence.
substantive analytical procedure can be used to obtain audit
to address the higher inherent
When inherent risk is higher, auditor need to design tests of details
solely from substantive analytical
risk. In case of higher inhered risk, audit evidence obtained
procedures is unlikely to be sufficient.
or manipulations that may exist
14 During the audit process, the auditor can easily identify all mistakes
checking processes. [May 18(2 Marks))
in the accounts through routing
Ans.: Statement is incorrect.
manipulation that mav
Auditor cannot be depended on routine checks to disclose all the mistakes or
ratio analysis alsohave to be ann:nd t
exist in accounts. Certain other procedures like trend and
addition to routine checks.
of current data with the nriorno
15 Ratio analvsis is a commonly used technique in the comparison
balances.
more prior period MTP-Oct. 18]
balance or withatrend in two or
Ans.: Statement is incorrect.
mndanoleis is a commonly used technique In the comparison of current data with the nrion
prior period balances
period balance or with atrend in tWo or more
analysing revenue and capital items forming part of balance
Ratio analysis involves sheet and profit
and loss account.
employees at fixed rates of pay throughout the
16 entity has a known number of
If an
would be more need to perform
tests of detalls on the payrol. period, there
RTP-Nov, 20]
8.9
 Analytical Procedures
Ans.: Statement is incorrect.
Chapter &
If an entity has a known number of employees at fixed rates of pay throughout the period, it m
possible for the auditor to use this data to estimate the total payroll costs for the period with a ,
degree of accuracy, thereby providing audit evidence for asignificant item in the financial
and reducing the need to perform tests of details on the payrol. statements
17 SA 520 deals with the auditor's use of analytical procedures as substantive procedures (
analytical procedures"), and as procedures near the end of the audit, that assist the'substantive
[May 22 (2auditor
preparation of the financial statements. in
Ans.: Statement is incorrect.
Marks)l
SA 520deals with the auditor's use of analytical procedures as substantive procedures
("substanti..
analytical procedures"), and as procedures near the end of the audit that assist the auditor wk
forming an overall conclusion on the financial statements.
18 The term "Analytical Procedures" means evaluation of financial
information through analysis of
plausible relationships among financial data and non-financial data.
[Nov. 22 (2 Marks)l
Ans.: Statement is correct.
SA 520 "Analytical Procedures" defines the term analytical procedures as evaluation of
information through analysis of plausible relationships among both financial and financial
It also encompasses such non-financial data.
investigation as is necessary of identified fluctuations or relationships that
are inconsistent with other relevant
amount.
information or that differ from expected values by a significant

Summary of Examination Weightage

Attempt Marks ofObjective Marks of Subjective
Questions Topics Covered
Questions
May 2018 2 5
Nov. 2018 Techniques available as SAP
0
May 2019
Nov. 2019*
3
May 2020* Evaluating the Reliability of Data
Exams cancelled due to Covid-19
Nov. 2020* 0 3
Jan. 2021*
Factors to be considered while using SAP
3
July 2021# 3
Techniques available as SAP
Dec. 2021*
3
Investigating results of Analytical Procedures
Use of Analytical procedures in
verification of items
May 2022* of expenses
2 4
Nov. 2022* 2
Purposes of applying Analytical Procedures
3
Examples of analytical procedures having
*Marks are given only for descriptive part of paper. consideration of relationships

8.10