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2-2 Short Paper: Analytical Procedures and the Audit Process
ACC411
Southern New Hampshire University
July 10,2022
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Date: July 06, 2022
Subject: Explanation of how and why data analysis is used in diverse stages of the financial audit
process
The financial auditing process involves the thorough evaluation and investigation of the
financial statements of an organization. It helps in making sure that the financial records that have
been captured in the statement give a true and fair picture of the organization’s transactions
(Understanding a financial statement audit - PWC. pwc, 2021). Data analysis is imperative while
performing financial auditing since it helps in obtaining reasonable assurance about the accuracy
and reliability of the details that are captured.
Risk assessment stage
The role of data analysis is imperative in the risk assessment stage of the financial auditing
process. When auditors evaluate and analyze a large volume of financial data of a business entity,
they get an opportunity to review and identify processes that support the audit processes and
procedures. There is the potential for obtaining new insights into the approach that a firm uses to
treat its financial transactions. For example, a comprehensive and in-depth data analysis can help
in not only understanding the operations of a business entity but also identifying the risks relating
to fraudulent activities (Tysiac, 2015).
Determination of sampling method and audit universe
The data analysis process is of paramount importance when it comes to choosing the
sampling method in the auditing process. This analysis can help to mitigate the risks associated
with sampling. Sampling risks arise when the selected data sample does not act as the
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representation of the population. The data analysis process can help to ensure that a proper sample
has been identified that perfectly represents the entire population in the auditing context. In the
audit universe, the data analysis process can add value by ensuring that the sample that is chosen
gives an insight into the integrated data and the auditing activity is carried out in an accurate
manner.
Substantive procedures stage
In the financial auditing context, the substantive procedures stage basically involves the
creation of evidence that is assembled by an auditor to support the completeness, accuracy,
validity, and reliability of the financial statements of an organization. The data analysis process
plays a key role in the specific stage since it enables auditors to go through the details and
financial records captured in the financial statements and detect any discrepancy in the accounting
transactions. The evaluation of financial data can help in testing diverse elements such as the
classes of transactions, accounting balances as well as disclosures. An auditor can rely on data
analysis for achieving the objective of the financial audit process and ascertain the effectiveness
and efficiency of the available procedures (As 2305: Substantive analytical procedures. Default,
2021).
End of audit stage
Even at the end of the financial audit stage, data analysis is considered to be imperative.
When the audit process nears the end, an auditor can apply the principles of data analysis for
enhancing the quality of the audit. The detailed analysis can help to ensure the entire activity has
been carried out in a streamlined manner and there exist no gaps. Data analysis can help in
confirming the outcome of the financial auditing process. It can help to ensure that a proper
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review of the financial information has been carried out by an organization and a fair and honest
financial picture is presented (Tysiac, 2015).
Thank You
Refereences
As 2305: Substantive analytical procedures. Default. (2021). Retrieved July 6, 2022, from
https://pcaobus.org/oversight/standards/auditing-standards/details/AS2305
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Tysiac, K. (2015). Data analytics helps auditors gain deep insight. Journal of Accountancy,
219(4), 52.
Understanding a financial statement audit - PWC. pwc. (2021). Retrieved July 6, 2022, from
https://www.pwc.com/im/en/services/Assurance/pwc-understanding-financial-statement-
audit.pdf
