CA A is the statutory auditor of AB Ltd., a company engaged in manufacturing high-precision industrial components used in the automobile sector. The…

The auditor needs to ensure that the data used for substantive analytical procedures is reliable, in accordance with SA 520 – Analytical Procedures. The following are the relevant points while determining whether data is reliable for purposes of designing substantive analytical procedures: Source of the information available. For example, information may be more reliable when it is obtained from independent sources outside the entity. Comparability of the information available. For example, broad industry data may need to be supplemented to be comparable to that of an entity that produces and sells specialized products. Nature and relevance of the information available. For example, whether budgets have been established as results to be expected rather than as goals to be achieved. Controls over the preparation of the information that are designed to ensure its completeness, accuracy and validity. For example, controls over the preparation, review and maintenance of budgets. In view of the above, CA A should critically evaluate the reliability of data by examining its source, comparability, relevance and the effectiveness of controls over its preparation before relying on it for substantive analytical procedures, so as to obtain sufficient and appropriate audit evidence.