Analytical procedures are one of many financial audit processes which help an auditor understand the client's business and changes in the business, and to identify potential risk areas to plan other audit procedures. It is also the evaluation of financial information made by a study of plausible or credible relationships among both financial and non financial data
Analytical procedures are performed at three stages of the audit: at the start, in the middle and at the end of the audit. These three stages are risk assessment procedures, substantive analytical procedures, and final analytical procedures.[1]
Analytical procedures include comparison of financial information (data in financial statement) with prior periods, budgets, forecasts, similar industries and so on. It also includes consideration of predictable relationships, such as gross profit to sales, payroll costs to employees, and financial information and non-financial information, for examples the CEO's reports and the industry news. Possible sources of information about the client include interim financial information, budgets, management accounts, non-financial information, bank and cash records, VAT returns, board minutes, and discussion or correspondence with the client at the year-end.