Analytical procedures : A practice based approach

Abstract: Analytical procedures are an important type of evidence gathering method for an auditor. They consist of evaluations of financial information through analysis or plausible relationships among both financial and non-financial data. A changing environment for auditors, like the implementation of ISA and the new standards on auditing, has modified the way auditors work with financial audits, therefore we find the subject interesting to study. Furhter, research has shown that analytical procedures can be performed in various ways and that the practice is in some sense dependent on the auditor’s judgment, hence judgment problems might occur. As analytical procedures are influenced by individual judgment, it becomes interestingto study the factors that influence the practice of analytical procedures, a focus emphasized in practice theory. Practice theory emphasizes the doing of actors in organizations and focus on the everyday activities. Practice theory aims to respect both the efforts of individual actors and the workings of the social’s influences to practice. This study will with the influence of practice theory try to answer the following research question: How are analytical procedures (APs) performed by auditors, and what factors causes that practice? The purpose of this study is to conceptualize the term APs in order to provide anunderstanding how APs are emphasized and used in practice by auditors. To accomplish this, we have made a qualitative study with a case study design using multiple cases. We have performed semi-structured interviews with auditors employed at any of the Big 4 firms (Ernst & Young, Deloitte, KPMG and PwC). The results of this study indicates that analytical procedures can be useful in variousways and have the potential to streamline the audit process and save time and money for audit firms if performed and interpreted in a correct and efficient way. Furthermore, we have been able to provide a rich description on the factors that either separately ortogether influences the practice of analytical procedures. They include macro factors like organizational influences as well as micro factors like individual attributes.