Para 2.1.15 — MSO (Audit)
Original Rule Text
2.1.15 Analytical review is a procedure that involves analysis of significant ratios and trends including the fluctuations that are inconsistent with other relevant data or which deviate from expectations. “Expectations” in this context refer to the auditor’s expectations of what a figure in the accounts being audited should approximately be as worked out from other relevant financial and non-financial information. “The commonly used analytical review techniques are
(a) comparisons involving a single component;
(b) comparison across components;
(c) system analysis
(d) predictive analysis;
(e) regression analysis and
(f) business analysis”.
What This Means
Analytical review is an audit procedure that analyzes significant ratios, trends, and data patterns to spot anomalies — things that deviate from what the auditor would reasonably expect. The auditor forms an expectation of what a figure should approximately be and then investigates significant differences. Common techniques include single-component comparisons, cross-component analysis, system analysis, predictive analysis, regression analysis, and business analysis.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Analytical review examines ratios, trends, and data for anomalies
- 2Based on comparing actuals against auditor expectations
- 3Six techniques: single-component, cross-component, system analysis, predictive, regression, and business analysis
- 4Deviations from expectations trigger further investigation
- 5Uses both financial and non-financial data
Practical Example
While auditing a State Excise Department, the auditor notices that liquor license revenue has dropped 25% compared to last year, even though no policy changes were made and population grew. This significant deviation from the expected trend triggers investigation, which reveals that a major district failed to collect renewal fees from 200 licensees.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
What are 'expectations' in analytical review?▼
When should analytical review be used?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.