Analytical procedures
In this lesson, you'll learn how to use analytical procedures as a key audit tool to identify trends, unusual transactions, and higher-risk areas throughout the audit process.
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In this lesson
- 0:00 Analytical procedures in audit planning
- 0:32 When analytical procedures are performed
- 1:06 Key financial ratios explained
- 3:12 Worked example: selecting appropriate ratios
- 4:48 Evaluating analytical procedure findings
- 6:27 Investigating unusual ratio movements
- 8:19 Procedures required for client understanding
About this lesson
Analytical procedures are performed at every stage—from planning through to final review—and involve calculating key ratios and comparing them year-on-year to spot inconsistencies and potential misstatements. You'll master the essential formulas for profitability ratios (gross profit margin, operating margin, ROCE), liquidity ratios (current ratio, quick ratio), working capital metrics (receivables days, payables days, inventory days), and investor ratios (gearing), all of which appear across ACCA papers and are not provided in the exam. Through worked examples, you'll learn how to interpret ratio movements critically—asking the right questions about what's changed and why, rather than treating unusual figures as proof of error—and how to select the most relevant ratios based on audit risks identified during planning.
Duration: 9m
Transcript
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