Relationship between the methods of evidence
gathering
1. Analytical procedures are first used during the
planning phase of the audit. Materiality levels and levels of tolerable
error are often derived from analytical procedures.
These are in turn used in audit sampling procedures.
2. Analytical procedures assist the auditor decide the
audit approach.
3. The results of tests of controls determine the level
of detailed testing of transactions and balances. Analytical
procedures provide indirect evidence as to the effective operation
of internal controls.
4. Detailed tests of transactions and balances are often performed towards the end of the audit in conjunction
with analytical procedures – analytical procedures compensate
to an extent for the weaknesses in sampling procedures both
for tests of controls and detailed testing of transactions and balances and vice versa.
5. Sampling is used for both tests of controls and
detailed testing of transactions and balances. Where CAATs are used, sampling may not be necessary because CAATs can often be used to test the whole population, either for tests of
controls, or for detailed testing of transactions and balances.