I. General Provisions

1.1. These auditing standards were drafted in compliance with the Law of the Republic of Azerbaijan “On the Chamber of Accounts”, the Internal By-Laws of the Chamber of Accounts and the standards recommended by INTOSAI (International Organization of Supreme Audit Institutions).
1.2. These standards aim to give recommendations and identify standards concerning the application of analytic procedures in conducting audits (control activities).
1.3. These analytic procedures are applied in preparing the work plan of audits (control activities) and conducting general overviews. The analytical procedures can also be applied at other stages.
1.4. The analytical procedures are the analysis of important indicators and assumptions, including the final investigation of changes and interactions that do not correspond to the significance of forecast indicators or other data.
1.5. Different methods are used in the implementation of analytical procedures. As a result of using these methods it becomes possible to finalize comprehensive analyses from merely comparing financial reports to utilizing modern statistic forms.

II. Analytical procedures in audit planning

2.1. The audit shall be planned in a manner to ensure that it is accomplished in an economically useful and effective way, in time and with high quality.
2.2. The followings shall be carried out at the stage of audit planning when applying the analytical procedures:
2.2.1. determining important aspects of the environment in which the auditee operates;
2.2.2. analyzing financial reports of the previous year and developing the process of understanding of reporting relationships;
2.2.3. identifying tests required to ensure the aim of the audit;
2.2.4. determining the level of importance of issues under consideration;
2.2.5. reviewing the results of internal control of the auditee and its work programme;
2.2.6. conducting investigations to determine the status of execution of recommendations, which were given on the basis of obtained information in previous audits.
2.3. The following procedures shall be taken on board in audit planning:
2.3.1. Gathering information on the auditee to evaluate the risk and determine the level of importance;
2.3.2. identifying the aim and scope of the audit;
2.3.3. carrying out initial analytical reviews to determine a method of approach to be accepted, as well as the nature and scope of issues to be required.

III. Analytical procedures in auditing

3.1. The head of an audit team shall choose methods of control, which are applied in the preparation of data used in analytical procedures, during the audit process. Methods of control over non-financial data can be used together with methods of control in accounting. Control is important in terms of implementing the aim of the audit and ensuring its quality.
3.2. The head of an audit team shall review all audit-related work and an audit act before finalization. This review shall be carried out once each stage of the audit is completed. The followings shall be ensured in executing the audit task in this process:
3.2.1. all evaluations and opinions shall be incorporated into the audit act provided that they are supported by acceptable and relevant audit evidence;
3.2.2. proper identification, documentation or comprehensive settlement of all serious flaws, shortcomings and other important issues shall be brought to the attention of an Auditor of the Chamber of Accounts;
3.2.3. The required changes and improvements for conducting the next audit shall be identified and recorded and knowledge acquired in previous audits shall be taken into account in the next audit plans together with the efficiency of internal control systems and accounting, as well as ideas of audit team members on the problems that caused corrections in accounting entries in pervious periods.

IV. Reliability degree of analytical procedures

4.1. The application of analytical procedures shall be based on the possibility that data interaction exists or may exist since there are no counter-arguments. Such interaction provides audit evidence about the integrity, accuracy and reliability of data obtained from an accounting system. Despite the presence of significant deviations, the reliability degree of the findings of analytical procedures depends on the evaluation of the risk by the head of an audit team for analytical procedures to overlook revealing the interaction based on forecast data.
4.2. The degree of reliability by the head of an audit team on the findings of analytical procedures shall depend on the following factors:
4.2.1. Importance of reviewed items. For example, if the balance of stock accounts is important, the head of an audit team does not count only on analytical procedures in drafting audit findings. At the same time, if separate revenue and expenditure items are not important, the head of an audit team can rely solely on analytical procedures;
4.2.2. Evaluation of control systems and inherent risks. For example, if internal controls of processing procurement orders are not sufficient and the risk of control systems is eventually high, detailed tests of separate transactions and balances of accounts are more reliable than analytical procedures in drafting findings concerning accounts receivable.

V. Investigation of unusual cases in analytical procedures

5.1. If analytical procedures have revealed substantial changes or interactions different from approved indicators or contrary to other data, the head of an audit team shall investigate such incompatibilities, get adequate explanations and collect relevant certifying evidence.
5.2. Learning substantial changes and interactions starts with sending queries to the head of an auditee and then the followings shall be done:
5.2.1. accepting responses from the head of an auditee as certifying evidence and comparing them with other evidence obtained in the course of auditing;
5.2.2. considering the necessity of using other audit evidence if there are no or insufficient explanations from the management of an auditee.