Analytical Procedures in Internal Audit

Analytical Procedures:

The Standards on Internal Audit (SIA) 6 states the Analytical Procedures in audit that are used while providing Internal Audit Service. The contends of this standard or SIA are as follows-

  1. Introduction
  2. Nature and Purpose
  3. Analytical Procedures in audit as Risk Assessment Procedures and in Planning process
  4. Analytical Procedures as Substantive Procedures
  5. Analytical Procedures in the Overall Review at the end of the Internal Audit Service
  6. Extent of Reliance on Analytical Procedures
  7. Investigating Unusual Items or Trends

To get a basic understanding about all the analytical procedures in audit and processes which are used during Internal Audit Service, it is important to interpret the above mentioned contents thoroughly. This article explains the SIA 6 and its content in detail.

Analytical Procedures in Audit


Analytical procedures are applied or used at the time of planning and stages of the overall review in the Internal Audit Service. It is basically used as a risk management procedure in the company.

Nature and Purpose:

It is important to analyze the nature and purpose of each and every analytical procedure in audit used by the auditor. The following are to be considered-

  • Comparing the company’s financial and non-financial data and information which is included in the analytical procedures in audit.
  • The extent, to which these procedures will be used are to be determined. The following factors are to be kept in mind while doing so-
  • Predicting the results of the analytical procedures in internal audit service with the help of precisions.
  • Examining all the significant areas.
  • Availability of the information regarding the type of industry of the organizations operations and comparing them.
  • Extent to which the other major audit procedures have provided support for getting the results of the audit.
  • Availability of the financial and non-financial information and its reliability.
  • Adequacy of the Internal Control System in an organization.

Analytical Procedures in audit used as Risk Assessment Procedures:

Sometimes the analytical Procedures are applied in the planning stage of the Internal Audit Service as Risk Assessment Procedures. These are used for-

  • Planning the overall internal audit activities in order to use both the financial and non-financial data and information of the company.
  • For obtaining the basic understanding about the business, its nature and its culture and environment. This is to be done for identifying the potential areas of risk in the organization.

Analytical Procedures used as Substantive Procedures:

The analytical procedures in audit are used as substantive procedures for the following reasons while the internal audit service are being conducted-

  • For inquiring the management about the availability of the required information and its reliability during the application of the analytical procedures.
  • For reducing the risk detected during the audit that were related to assertions of financial statements and processes.

Analytical Procedures in the Overall Review at the End of audit:

The analytical procedures must be applied during the end of the internal audit service. This is to be applied when the auditor is forming an overall conclusion about the audit.

Extent of reliance and Investigating Unusual Items or Trends:

The following factors forms the basis of the extent of reliance on the use of analytical procedures in audit-

  • Internal audit objectives and the audit procedures directed towards these.
  • Materiality of all the involved items.
  • Assessments of the control as well as inherent risks.
  • Accuracy in predicting the expected results of the used analytical procedures.

Investigating Unusual Items or Trends:

The unusual trends and items must be investigated by the auditor while providing Internal Audit Activities in cases where-

  • The auditor must investigate and also obtain an explanation that is adequate along with corroborative evidences, appropriately supporting the investigation.
  • Inconsistent relationship with the other information that is relevant.
  • Data deviates or diverges from the predicted amounts.
Author: Anil Agrawal
EZYBIZ India Consulting LLP, New Delhi. The firm is business and tax consultancy firm providing consultancy in Taxation, Regulatory, Transfer pricing, Valuation, Corporate funding and Business set up matters. He may be reached at 9899217778 or