INVESTIGATING THE USE OF ANALYTICAL PROCEDURES - AN UPDATE AND EXTENSION

The importance of analytical procedures (APs) in the audit examination is evidenced by their extensive use by auditors and the requirement o f Statement on Auditing Standards No. 56 (SAS No. 56) that these proce dures be used in the planning and review stages of all audit examinati ons. This study updates previous research efforts (e.g., Tabor and Wil lis 1985) by surveying practicing auditors to identify the current use of six APs. In addition, previous research is extended by investigati ng (1) the use of APs in audits conducted by both large (Big Six) and smaller CPA firms and (2) the relative importance of several factors i nfluencing the use of APs. A total of 100 auditors affiliated with Big Six firms and 90 auditors affiliated with smaller firms participated in this survey. The results of this study indicate that auditors utili ze relatively simple APs in the audit examination compared to more sop histicated APs. In addition, consistent with SAS No. 56 requirements, APs appear to be used extensively in the planning, substantive testing , and review stages of the audit examination. In addition to the requi rements of SAS No. 56, respondents cited the increased use of microcom puters and increased fee pressures as primary reasons for the extensiv e use of APs in audit examinations. Finally, it appears that auditors consider the use of APs to be most appropriate for (1) recurring audit engagements, (2) clients with an effective internal control structure , and (3) accounts having a low risk of material misstatement.