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Introduces a new analytical review procedure that measures the degree to which a data set’s digit distribution deviates from a Benford digit distribution. This deviation can indicate potential manipulation and can be used to signal the need for further audit testing. An artificial neural network is used to distinguish between “normal” and “manipulated” financial data. The results show that if data have been contaminated (at a 10 per cent level or more) a Benford analytical review procedure will detect this 68 per cent of the time. If the data are not contaminated, the test will indicate that the data are “clean” 67 per cent of the time. Because analytical review procedures are not used in isolation, these results probably understate the effectiveness and potential of a digits‐based analytical review procedure. This procedure’s fraud detection results compare favorably to traditional analytical review procedures. Importantly, its unique analysis procedure allows it to complement traditional analytical review procedures. A key limitation of this study is that it uses simulated data, rather than actual data. Such an enhancement will be a critical step in future research. This method appears to have potential merit and provides many opportunities for new research.

Examines the impact of client industry on the use and effectiveness of audit analytical procedures. Segregates audit client firms into two industry categories ‐ new and matured. Posits that the industry category the client firm is operating in will have a substantial effect on the extensiveness, types and effectiveness of analytical procedures employed. In particular, hypothesizes that analytical procedures will be more extensively and effectively used in the audit of firms in matured industries. Further, hypothesizes that trend analysis will be used primarily in the audit of firms in matured industries while visual scanning of data and ratio analyses will be used in the audit of firms in both new and matured industries. The results of a questionnaire survey distributed to one of the Big Six audit firms in Singapore support the above hypotheses.

We have designed this in-class exercise to benefit undergraduate or graduate students enrolled in courses in auditing. This in-class exercise involves six short independent analytical procedures scenarios, two each for three different accounts: Payroll Expense; Depreciation Expense; and Interest Expense. The scenarios require students to perform substantive analytical procedures for each of the financial statement accounts. Students must use their accounting knowledge, analytical thinking skills, and problem-solving ability in order to compute an estimated expectation for an account balance. Following computing an estimate of the expected balance, students must then compare the result to the client-recorded balance and determine if the difference is within tolerable limits established for the audit. The primary learning objectives for the in-class analytical procedures exercise involve the following:

1. Understanding when it might be appropriate for the auditor to perform substantive analytical procedures,

2. Understanding how to form an expectation of an account balance when performing analytical procedures, and

3. Understanding how to evaluate the results of a substantive analytical procedure.

Understanding when it might be appropriate for the auditor to perform substantive analytical procedures,

Understanding how to form an expectation of an account balance when performing analytical procedures, and

Understanding how to evaluate the results of a substantive analytical procedure.

In cooperation with KPMG, we believe that the analytical procedures exercise gives students a better understanding of performing substantive analytical procedures. ¹ As identified by Auditing Standard AU-C 520, PCAOB Standard AS 2305, and in the academic literature (e.g., Hirst & Koonce, 1996), analytical procedures are an important part of the audit process. Understanding when and how to perform substantive analytical procedures, combined with how to evaluate the results, will aid in student knowledge of the audit process.

There is an increasing recognition in the public audit profession that the emergence of big data as well as the growing use of business analytics by audit clients has brought new opportunities and challenges. That is, should more complex business analytics beyond the customary analytical procedures be used in the engagement and if so, where? Which techniques appear to be most promising? This paper starts the process of addressing these questions by examining extant external audit research. 301 papers are identified that discuss some use of analytical procedures in the public audit engagement. These papers are then categorized by technique, engagement phase, and other attributes to facilitate understanding. This analysis of the literature is categorized into an External Audit Analytics (EAA) framework, the objective of which is to identify gaps, to provide motivation for new research, and to classify and outline the main topics addressed in this literature. Specifically, this synthesis organizes audit research, thereby offering guidelines regarding possible future research about approaches for more complex and data driven analytics in the engagement.

Analytical procedures entail estimating an expected value for an account and comparing the estimation to the book value. External auditors make extensive use of analytical procedures. By applying analytical procedures before the external audit is performed, the management accountant can locate and correct misstatements before they become problematic. Examines the three categories of analytical procedures and their utility to the management accountant. The three categories are: reasonableness tests, trend analysis, and ratio analysis. Explains each category and discusses the methods within each category. Also, provides examples to aid the accountant in applying the procedures.

This article gives an overview of artificial neural network (ANN) studies conducted in the auditing field. The review pays attention to application domains, data and sample sets, ANN‐architectures and learning parameters. The article argues that these auditing ANN‐applications could serve the analytical review (AR) process. The summary of the findings pays attention to whether authors state that ANNs have potential to improve analytical review (AR) procedures. Furthermore, the article evaluates which are the most influential contributions and which are open ends in the field. The article makes some practical suggestions to motivate academics and practitioners to collaborate in further exploration of the potential of ANNs.

Discusses whether management, as a part of its duties, designs and maintains a system of internal control. Shows that the COSO report (“Internal Control ‐ Integrated Framework”, 1992) emphasizes that management is responsible for the design and operation of internal control; as part of its responsibilities for controlling, management monitors the system of internal control. States that analytical procedures are tools which management can use to monitor controls. The methods highlight which operating or financial data might contain errors. Notes that the presence of errors indicates that controls are not effective. Explores analytical procedures which management might use in monitoring controls. Says that some analytical procedures are straightforward, requiring few calculations and relatively few historical data. Posits that other techniques are more complex, using statistical models and more historical information. Provides practical guidance on applying analytical procedures.

The purpose of this paper is to develop, for use in everyday design, a procedure that incorporates the effect of concrete cracking in reinforced concrete (RC) beams at service load and requires computational efforts which is a fraction of that required for the available methods. Further for ease of use in everyday design the reinforcement input data is minimized. The procedure has been demonstrated for continuous beams and is under development for tall building frames.

The procedure is analytical at the element level and numerical at the structural level. A cracked span length beam element consisting of three cracked zones and two uncracked zones has been used. Closed form expressions for flexibility coefficients, end displacements, crack lengths, and mid-span deflection of the cracked span length beam element have been presented. In order to keep the procedure analytical at the element level, average tension stiffening characteristics are arrived at for cracked zones.

The proposed procedure, at minimal computation effort and minimal reinforcement input data, yields results that are close to experimental and finite element method results.

The procedure can be used in everyday design since it requires minimal computational effort and minimal reinforcement input data.

A procedure that requires minimal computational effort and minimal reinforcement input data for incorporating concrete cracking effects in RC structures at service load has been developed for use in everyday design.

A semi‐analytical integration technique to evaluate the singular integration in 3‐D boundary element method for electromagnetic field computation is reported. The technique has been applied in a hybrid finite element—boundary integral model to evaluate the singular integral terms when constructing the “outside stiffness matrix” in the case of small air‐gaps, and it has also been used to calculate the exterior magnetic field in the proximity of the boundaries. The comparison with the conventional Gaussian quadrature has been carried out by modelling a 3‐D magnetostatic problem with a small air‐gap.

The study aims at examining whether or not poor macro-economic conditions can lead auditors to change their risk management policies when performing an audit.

The present study is based on a questionnaire distributed to auditors working at the branches of the big four audit firms in Egypt over two rounds under different economic conditions. The responses in each of the two rounds were analyzed to identify any similarities or differences in auditors' behavior when performing analytical procedures under different economic conditions.

Auditors appear to alter their risk management strategies during challenging economic times. The present study results suggest that auditors increase their dependence on non-financial data and information as supporting evidence when assessing audit risk during times of economic difficulties. The findings also show that when the macro-economic trends are declining, audit firms tend to assign the performance of analytical procedures to more experienced audit personnel (i.e. senior auditors, audit managers and partners) with less of this work being done by the audit staff.

The present study is based on a sample of 40 respondents. It is recommended for future research to use a larger sample size as results may differ for a greater sample. The present research did not consider the effect of auditors' specialization in a certain industry on the audit judgment during an audit engagement. Future research would examine the impact of auditors' industry specialization on audit judgments during periods of unfavorable economic conditions. The present study is based on a survey that aims at capturing auditors' perception. Further research would use other research techniques (e.g. laboratory experiment) to examine the effect of the general economic conditions on auditors' assessment of audit risk.

Auditors need to give sufficient attention to the analyses of non-financial information of their audit clients during the performance of the analytical procedures under unstable economic conditions rather than depending solely on financial information. Moreover, audit firms could use a much richer labor mix for audit teams through increasing their reliance on experienced senior auditors, audit managers and partners during periods of deteriorating macro-economic conditions to mitigate risk and improve audit judgment.

This study adds to the scarce literature in developing countries investigating the influence of external economic factors on the audit process. The present research provides information to practitioners and educators about risk management policies that could be considered in case of performing analytical procedures during an audit conducted under poor economic conditions.