Subsection 2: Certification of accounts

The standard of professional practice relating to analytical procedures, approved by the Minister of Justice, is set out below:

STANDARD OF PROFESSIONAL PRACTICE RELATING TO ANALYTICAL PROCEDURES

Introduction

1. The auditor uses various audit techniques, including analytical procedures, to gather the information needed to reach conclusions on which to base his opinion on the financial statements.

2. The purpose of this standard is to define the principles relating to the use of this technique by the statutory auditor.

Definitions

3. Substantive procedures: audit procedures performed to detect material misstatements at the assertion level.

They include:

- tests of details;

- analytical procedures.

4. Analytical procedure: an audit technique that consists of assessing financial information based on:

- its correlation with other information, whether or not derived from the accounts, or with previous, subsequent or forecast data for the entity or similar entities;

- and the analysis of significant variations or unexpected trends.

Implementation of analytical procedures

5. The statutory auditor performs analytical procedures when obtaining an understanding of the entity and its environment and assessing the risks of material misstatement of the financial statements. At this stage, the use of this technique may in particular enable the statutory auditor to identify unusual transactions or events.

6. When the statutory auditor designs the substantive controls to be implemented, in response to his risk assessment at the assertion level and for material classes of transactions, account balances and disclosures in the notes, he may use analytical procedures as substantive controls. This is the case, for example, when he considers that these procedures, alone or in combination with others, are more effective than tests of details alone.

7. The statutory auditor performs analytical procedures during the review of the overall consistency of the accounts, carried out at the end of the audit. The application of this technique enables him to analyse the overall consistency of the accounts in the light of the information gathered throughout the audit on the entity and its business sector.

8. Where analytical procedures highlight information that does not correlate with other information or significant variations or unexpected trends, the statutory auditor determines the audit procedures to be implemented to elucidate these variations and inconsistencies.

9. Where the analytical procedures lead the statutory auditor to identify previously undetected risks, the statutory auditor assesses the need to supplement the audit procedures it has performed.