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| Bangladesh Standard on Audit(BSA-520) |
What is the Bangladesh standard on Audit-BSA-520? Describes in details:
Bangladesh Standard on Auditing (BSA) 520, titled "Analytical Procedures", provides guidance on the use of analytical procedures during the audit process. Analytical procedures involve evaluating financial information by studying relationships among both financial and non-financial data.
Here are the key points of BSA 520:
1.Objective:
The primary objective of BSA 520 is to guide auditors on how to use analytical procedures effectively during an audit. These procedures help auditors identify unexpected fluctuations, patterns, or relationships that might indicate risks of material misstatement in the financial statements.
2.When to Use Analytical Procedures:
Planning Stage:
Auditors use analytical procedures during the planning phase to gain an understanding of the business and identify areas of potential risk.
Substantive Testing:
Analytical procedures can also be used as a substantive testing procedure to obtain audit evidence about particular balances or transactions.
Final Review:
At the end of the audit, auditors can use analytical procedures to assess the overall reasonableness of the financial statements and whether the conclusions reached during the audit are consistent with the auditor's understanding.
3.Types of Analytical Procedures:
Trend Analysis: Comparing financial data over several periods to identify trends and patterns.
Ratio Analysis: Analyzing key financial ratios (e.g., profit margins, liquidity ratios) to assess the financial health of the organization.
Reasonableness Tests:
Using known information or expectations to estimate what certain financial statement items should be and comparing them to actual amounts.
4.Evaluating Results:
If the analytical procedures reveal significant differences or unexpected results, the auditor should investigate further to determine whether they represent risks of material misstatement.
The auditor should consider the reliability of the data used for the analysis and the nature of the relationships being analyzed.
5.Documentation:
The auditor must document the procedures performed, the findings, and any conclusions drawn from the use of analytical procedures.
6.Benefits:
Analytical procedures help auditors to identify areas of potential misstatements, fraud, or errors in financial statements.
They can be more efficient than detailed tests of transactions and balances in certain circumstances.
In summary, BSA 520 outlines the use of analytical procedures as an essential audit tool for identifying potential risks and obtaining audit evidence. These procedures are used throughout the audit process, from planning to final review, and help auditors form conclusions regarding the accuracy of the financial statements.