Which statement about analytical procedures is true for planning an audit?

• A. Analytical procedures usually involve comparisons of ratios developed from recorded amounts with assertions developed by the management.
• B. Analytical procedures used in planning an audit ordinarily use data aggregated at a high level.
• C. Analytical procedures can replace tests of controls in gathering evidence to support the assessed level of control risk.
• D. Analytical procedures are more efficient, but not more effective, than tests of details and transactions.

Answer: (B)

Analytical procedures in planning focus on forming an overall expectation of balances and relationships and then comparing those expectations to what’s recorded. At this stage you’re trying to get a broad sense of the client and identify areas that may need closer attention, so you rely on aggregated data rather than digging into every detail. This means using high-level data like totals, ratios, and trend comparisons—often drawing on budgets, industry norms, and prior period results to set expectations.

When actual results differ from those expectations by more than what’s reasonable from normal fluctuations, that signals areas worth investigating further or adjusting the audit approach. These planning analyses help shape the nature, timing, and extent of subsequent procedures and where to focus testing.

Analytical procedures at planning do not replace tests of controls or detailed substantive testing when those are needed. They can be efficient and informative for risk assessment, but they’re not a substitute for other evidence-gathering steps.