Analytical Review Procedures

In addition to the audit procedures discussed above, the following analytical review procedures may often be helpful as a means of obtaining audit evidence regarding the various assertions relating to debtors, loans and advances:

1. comparison of closing balances of debtors, loans and advances with the corresponding figures for the previous year;
2.  comparison of the relationship between current year debtor balances and the current year sales with the corresponding budgeted figures, if available;
3.  comparison of actual closing balances of debtors, loans and advances with the corresponding budgeted figures, if available;
4.  comparison of current year’s aging schedule with the corresponding figures for the previous year;
5.  comparison of significant ratios relating to debtors, loans and advances with similar ratios for other firms in the same industry, if available;
6. comparison of significant ratios relating to debtors, loans and advances with the industry norms, if available.

It may be clarified that the foregoing is only an illustrative list of analytical review procedures which an auditor may employ in carrying out an audit of debtors, loans and advances. The exact nature of analytical review procedures to be applied in specific situation is a matter of professional judgement of
the auditor.