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The Auditor's Guide to Analytical Procedures Under ISA 520
Complete guide: ISA 520 requirements quick reference, decision flowchart for when to use analytical procedures vs. tests of details, industry-specific ratio checklists for 12 sectors, threshold-setting guide by risk level, sample completed working paper, common quality-review findings, and documentation checklist.
Analytical Review Under ISA (Ireland) 520
Ireland applies ISA (Ireland) 520 Analytical Procedures as part of the ISA (Ireland) framework issued by the Irish Auditing and Accounting Supervisory Authority (IAASA) in conjunction with the recognised accountancy bodies. ISA (Ireland) 520 closely follows the ISA (UK) 520 standard, reflecting the historical alignment between Irish and UK auditing standards, with Irish-specific amendments addressing the Companies Act 2014 and other Irish regulatory requirements. The standard requires auditors to perform analytical procedures as part of the risk assessment process, as substantive procedures where the auditor determines that analytical procedures are appropriate for the assessed risk, and near the end of the audit to assist in forming an overall conclusion on the financial statements. All statutory auditors in Ireland must be registered with a recognised accountancy body, such as Chartered Accountants Ireland, CPA Ireland, or ACCA, and must comply with ISA (Ireland) when performing statutory audits. IAASA exercises direct oversight of audit firms that audit PIE entities in Ireland, including firms auditing entities listed on Euronext Dublin and other entities designated as PIEs under the EU Audit Regulation. The recognised accountancy bodies perform quality assurance reviews of non-PIE audit engagements under the supervision of IAASA, creating a tiered oversight structure that covers the entire Irish statutory audit market.
IAASA Inspection Findings on Analytical Procedures
IAASA's annual inspection reports provide detailed findings on the quality of statutory audits performed in Ireland, and analytical procedures have featured as an area of concern in multiple inspection cycles. IAASA's findings closely mirror the themes identified by the FRC in the UK, reflecting the aligned standards framework, but incorporate Irish-specific regulatory context. Key IAASA findings include the following recurring deficiencies. The precision of the auditor's expectation is frequently insufficient — auditors develop broad expectations based on general assumptions rather than building quantified models from identified relationships between financial and non-financial data specific to the entity. The investigation of differences between expected and recorded amounts does not always include adequate procedures to corroborate management explanations, with auditors sometimes recording a management explanation in the audit file without demonstrating that they have obtained independent evidence to support it. The threshold for investigation is not consistently established before the analytical procedure is performed, and the documentation of the basis for the expectation, the threshold, and the evaluation of differences is sometimes inadequate. IAASA has also noted that completion-stage analytical procedures are sometimes treated as a formality, with auditors performing only a cursory review of the financial statements rather than developing independent expectations and assessing whether the financial statements are consistent with the auditor's overall understanding of the entity and its environment gained during the audit.
Companies Act 2014 and Irish Regulatory Framework
The Companies Act 2014 is the primary legislation governing companies in Ireland and establishes the framework for financial reporting, audit requirements, and directors' obligations. The Act introduces company types (LTD, DAC, PLC, CLG, ULC) with different reporting obligations, and the audit exemption thresholds determine which companies are required to have a statutory audit. Auditors performing analytical procedures in Ireland must understand how the Companies Act 2014 affects the financial data under review, including the directors' compliance statement required for large companies, the requirement for a directors' report that includes a business review, and the specific disclosure requirements that affect the content and presentation of financial statements. The Irish regulatory landscape also includes the Central Bank of Ireland, which regulates financial services entities and imposes additional reporting requirements that affect the financial data available for analytical review. For entities operating in the International Financial Services Centre (IFSC) or as Section 110 special purpose vehicles, the specific regulatory and tax-driven structures create unique analytical review considerations that require the auditor to understand the entity's business model and the economic substance of transactions. The Office of the Director of Corporate Enforcement (ODCE) has enforcement powers under the Companies Act 2014 that include the ability to investigate suspected offences relating to the preparation of financial statements, adding a regulatory dimension that auditors must be aware of when performing analytical procedures.
FRS 102 and IFRS Considerations for Irish Audits
Irish entities apply either IFRS (for listed entities and those that choose to adopt IFRS) or FRS 102 (the Financial Reporting Standard applicable in the UK and Republic of Ireland) for their financial reporting. The choice of framework significantly affects the design of analytical procedures. FRS 102 is a principles-based framework that differs from IFRS in several areas relevant to analytical review, including revenue recognition (FRS 102 Section 23 retains the risks-and-rewards model), financial instruments (FRS 102 Sections 11 and 12 provide a simplified framework compared to IFRS 9), and lease accounting (FRS 102 Section 20 retains the finance/operating lease classification rather than IFRS 16's right-of-use model). These differences mean that identical economic transactions may produce different financial statement outcomes depending on the framework, which affects the comparability of data across periods for entities that have transitioned between frameworks and the benchmarking of entity data against industry peers that may report under a different framework. Irish auditors must develop analytical expectations that are calibrated to the specific recognition and measurement requirements of the applicable framework. For multinational groups headquartered in Ireland, the relationship between the parent's IFRS consolidated financial statements and subsidiaries reporting under FRS 102 or local GAAP in other jurisdictions creates additional complexity that the auditor must navigate when performing group-level analytical procedures. The Central Statistics Office (CSO) and the Economic and Social Research Institute (ESRI) publish data that supports analytical expectation development for the Irish economy, including GDP, GNP, modified domestic demand (which adjusts for the distorting effects of multinational corporate structures on Irish national accounts), employment statistics, and sector-specific data.
Common Inspection Findings — IAASA (Irish Auditing and Accounting Supervisory Authority)
The following are typical findings from IAASA (Irish Auditing and Accounting Supervisory Authority) inspections relating to analytical procedures:
Insufficient precision in the development of the auditor's expectation — broad expectations based on general assumptions rather than quantified models
Management explanations for analytical review differences accepted without adequate corroboration through independent evidence
Investigation threshold not established before performing the analytical procedure, undermining objectivity of the significance assessment
Completion-stage analytical review performed as a cursory exercise without developing independent expectations or evaluating consistency with accumulated audit evidence