Acca aa s21 Notes

I
nspection. For example, the physical condition of inventories or non-current assets
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O
bservation. For example, watch what staff do in the warehouse as deliveries are received.
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Recalc
U
lation and re-performance. For example, recalculate the wage calculations to confirm 
they are correct.
Note that these five procedures can be remembered by the vowels, A, E, I, O and U.
2. Analytical procedures
Analytical procedures are used to evaluate plausible relationships between financial and non-financial 
data including, calculating ratios and then comparing the amounts and ratios to:
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Last year’s results
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Budgets
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Industry standards
Also the trends and changes in the company’s financial statements over time will be examined.
September 2021 to June 2022 exams
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Analytical procedures may be used at three stages of the audit:
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Planning (ISAs 300 & 315)
If last year’s inventory amounted to 34 days’ of supply 
and this year amounted to 97, then you have identified 
an area that will need attention during the audit. Why 
has inventory increased so much? Was this planned? Is 
there an error? Will it sell? What value should it have?
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Substantive procedures (ISA 520)
If last years collection period was 32 days and this years 
is 31.5, then this gives some confidence that the figures 
this year are correct. Similarly if sales are very close to 
budget, this implied some support for the figures being 
correct.
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