Internal auditing Standard No. 15 Analytical Review
Introduction
Internal Auditing Standard No. 15, also known as the Analytical Review, provides guidance on the techniques and processes that should be used when undertaking an audit. This standard focuses on the analysis of financial, operational and management matters. It involves the analysis of various data sources and the comparison of planned goals with actual performance.
Traditionally, analytical review involves the use of quantitative analysis. However, this standard also encourages an exploration of qualitative data as well. This significantly expands the scope of an audit and helps improve the accuracy of findings and recommendations.
Scope
The scope of the Analytical Review extends to all areas of the organization as long as they are deemed relevant to the audit. This includes areas that may not be directly related to the traiditional review of financial transactions, such as performance goals, objectives, strategies, information systems, processes and controls.
Analytical Review Methods
The Analytical Review may be conducted in two ways: individually or with a team of experts. Individual analytic methods typically involve the auditors interpretation and application of existing data and information.
An example of an individual analytical method is a ratio analysis. This is a process for measuring relative changes in various ratios, such as profitability or liquidity. Ratio analysis is beneficial for detecting trends in an organization’s financial performance. It is also useful for determining if the organization is adhering to its financial budgets and goals.
Team-based analytical methods are more complex, typically requiring an in-depth review of an organization’s operations. These methods may include trend analysis and simulations, as well as advance statistical analysis tools.
Analytical Review Output
The output of an Analytical Review heavily depends on the methods used. However, all outputs should include suggested methods for improving the accuracy of the review and improving any deficiencies found. It should also include suggested readings and references.
Summary
The Analytical Review is an important tool for auditors. It significantly expands the scope of an audit and allows for greater insight into the operations of an organization. It also helps to detect trends and inefficiencies that may not have been otherwise identified.
