Question

explain how and why data analysis is used in the various stages of the audit process, including the risk assessment stage, the determination of sampling method and audit universe, the substantive procedures stage, and the end of the audit.

Answer 1

Hai

Auditor data analytics is about enhancing audit quality. There are different angles on what this means in practice but audit quality is a common objective of auditors, regulators and standard-setters alike. A high-quality, focused and effective audit is aligned with the way the audited entity manages its data and operations.

Analytical procedures are used throughout the audit process and are conducted for three primary purposes:

1. Preliminary analytical review – risk assessment Preliminary analytical reviews are performed to obtain an understanding of the business and its environment (eg financial performance relative to prior years and relevant industry and comparison groups), to help assess the risk of material misstatement in order to determine the nature, timing and extent of audit procedures, ie to help the auditor develop the audit strategy and programme.
2. Substantive analytical proceduresAnalytical procedures are used as substantive procedures when the auditor considers that the use of analytical procedures can be more effective or efficient than tests of details in reducing the risk of material misstatements at the assertion level to an acceptably low level.
3. Final analytical review Analytical procedures are performed as an overall review of the financial statements at the end of the audit to assess whether they are consistent with the auditor’s understanding of the entity. Final analytical procedures are not conducted to obtain additional substantive assurance. If irregularities are found, risk assessment should be performed again to consider any additional audit procedures are necessary.

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