Analytical auditing: A status report;

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Analytical Auditing: A Status Report Rodney J. Anderson
Clarkson, Gordon & Co.
The purpose of this paper is to provide: a) a brief overview of the historical development of "Analytical Auditing," b) the reasons which underlay that de­velopment,
c) the purpose of certain modifications introduced in subsequent years, and d) an evaluation of the use of analytical auditing in practice today.
Analytical auditing is a systems-oriented approach to that portion of the auditor's annual audit which involves the study and evaluation of internal control. It is based on flow chart analysis supported by appropriate additional compliance verification procedures. It is not the purpose of this paper to explain the ap­proach
in detail, for it has already been comprehensively documented in the literature.1 Rather, the purpose is to comment on past and present trends and to cast an eye to the future.
Where Does Analytical Auditing Fit in?
Generally accepted auditing standards2 imply a division of the program for the recurring annual audit into a) a review and evaluation of internal control together with testing of transactions and b) a gathering of other evidence to support the audit opinion. I shall refer to the first stage as the "interim audit" (various practitioners use various names). I take the objectives of the interim audit to be the following:
1) To determine the accuracy and reliability of the accounting records and the appropriateness of the accounting methods followed in order to provide a basis for planning the timing, nature, and extent of the substantive procedures necessary to support an opinion on the finan­cial
statements through a) Review and evaluation of the accounting system and other relevant internal controls, and b) Compliance verification of the existence, effectiveness and continuity of operation of those controls on which reliance is to be placed, or substantive verification of internal evidence.
2) To perform those substantive procedures which can most usefully be commenced at an interim date. (Ref. h), Vol. 1, p. 297.)
There are various strategies by which one can accomplish this interim audit objective. The two principal strategies may be referred to as the systems-oriented approach and the data-oriented approach. The former places its primary emphasis on auditing "through" the system and understanding how the system
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