An Empirical Investigation of the Use of ISA 520 'Analytical Procedures' Among Big 4 versus Non-Big 4 Audit Firms in Egypt
Samaha, Khaled and Hegazy, Mohamed. An empirical investigation of the use of ISA 520 "analytical procedures" among big 4 versus non-big 4 audit firms in Egypt. Managerial Auditing Journal, 25(9), 882-911
30 Pages Posted: 18 Jun 2014
Date Written: June 26, 2010
This paper contributes to the understanding of the nature and uses of analytical procedures (APs) within the Egyptian culture and economic context by adapting relevant aspects of prior studies on APs to the Egyptian audit context. The study investigated the extent of use of the international standard on auditing (ISA 520) on APs in Egypt during the three main stages of an audit by different size of firms and different levels of staff. It examined auditors perceptions of the frequency and effectiveness of different types of APs techniques in achieving a selected set of audit objectives. The study also identified the types of assurance provided by APs and their influence on detailed testing as well as analyzing the role of auditing standards in the context of the use of APs. The design and research method are empirical using a questionnaire survey to collect information on actual uses of AP from 14 audit firms in Egypt which audit the 100 actively traded companies on the CASE 100 index. The survey was carried out between 2007 and 2008.
The results of the study showed relatively low use of APs by Egyptian auditors with wide variations in its use by big 4 and other auditing firms. Auditors from big 4 firms are found to use APs to a greater extent than auditors from Non-big 4 firms. The study confirmed the use of APs at all stages of audit engagements. Also, the reliance on APs tends to differ by auditors rank and position. The majority of auditors consider APs useful in achieving audit objectives. Audit firms of all size continue to emphasize judgment-based compared to quantitatively based procedures. The results also indicated a lack of confidence in the use of APs as substantive procedures. Finally, the study confirmed prior research findings as auditing standards were regarded as most effective in codifying existing large firms practice. It was found that ISA 520 has been least effective in stimulating change in audit practice. The different economic, political, educational, culture environment in Egypt may restrict the generalisability of this study results. In order to increase the wide use of APs by Egyptian auditors in the various stages of the audit engagement, auditors must put a lot of efforts in understanding the requirements of the Egyptian Auditing Standards for APs use. Auditors must understand and apply various APs techniques especially those associated with statistics and mathematical models. Educational Institutions and the Egyptian Association of Accountants and Auditors must play significant role in educating auditors about APs techniques and their use in planning, testing and final review of the financial statements.
Keywords: Auditing, Audit process, International standards on auditing, ISA 520, Analytical Procedures, Audit effectiveness, Audit efficiency, Egypt
JEL Classification: M41
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