Statements of Auditing Standards in Taiwan 　 　 　 　 SAS No. 12   Analytical Procedures 　 　                          　 　 　 　 Status 　 　 　 　 　 Issued by Auditing Standards Committee in Taiwan on 31 January, 1987. 　 　 　 　 　 Summary 　 　 　 　 　 Analytical procedures are an important part of the audit process and consist of evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data. Analytical procedures range from simple comparisons to the use of complex models involving many relationships and elements of data. 　 　 　 　 　 Analytical procedures are used for the following purposes: a.   To assist the auditor in planning the nature, timing, and extent of other auditing procedures. b.   As a substantive test to obtain audit evidence about particular assertions related to account balances or classes of transactions. c.   As an overall review of the financial information in the final review stage of the audit. 　 　 　 　 　 The auditor should apply analytical procedures at or near the end of the audit when forming an overall conclusion as to whether the financial statements as a whole are consistent with the auditor’s understanding of the entity. 　 　 　 　 　 Analytical procedures involve comparisons of recorded amounts, or ratios developed from recorded amounts, to expectations developed by the auditor. The auditor develops such expectations by identifying and using plausible relationships that are reasonably expected to exist based on the auditor's understanding of the client and of the industry in which the client operates. Following are examples of sources of information for developing expectations: a.   Financial information for comparable prior period(s) giving consideration to known changes. b.   Anticipated results—for example, budgets, or forecasts including extrapolations from interim or annual data. c.   Relationships among elements of financial information within the period. d.   Information regarding the industry in which the client operates. e.   Relationships of financial information with relevant nonfinancial information. 　 　 　 　 　 When analytical procedures identify significant fluctuations or relationships that are inconsistent with other relevant information or that deviate from predicted amounts, the auditor should investigate and obtain adequate explanations and appropriate corroborative audit evidence. 　 　 　 　 　 The investigation of unusual fluctuations and relationships ordinarily begins with inquiries of management, followed by: a.   Corroboration of management’s responses, for example, by comparing them with the auditor’s understanding of the entity and other audit evidence obtained during the course of the audit; and b.   Consideration of the need to apply other audit procedures based on the results of such inquiries, if management is unable to provide an explanation or if the explanation is not considered adequate. 　 　 　 Effective date   　 　 　 This Statement is effective from 1 July, 1987. 　 　 　 　 Copy right(c) 2006 Accounting Research and Development Foundation in Taiwan Address: 20th. F., No.17, Sec.1, Chengde Rd., Taipei, Taiwan Tel:886-2-2549-0549