Analytical Procedures have been part of the audit process for decades, but many auditors fail to understand their objectives or how these procedures should be properly applied for substantive testing, resulting in many audit deficiencies, some of which are serious. Carefully designed analytical procedures can be as effective as substantive tests of details (or, depending on the circumstances, even more effective), but it is far too easy, in the interest of efficiency, to place undue reliance on weak analytical procedures that are too imprecise to have a reasonable chance of detecting a material misstatement.
Auditors commonly use them to achieve audit efficiency in two ways:
1) to corroborate substantive tests of details for the same assertion, thereby enabling a reduction in the scope of the tests of details (for example, by lowering the sample size); or
2) to use in place of a substantive test of details.