Analytical Procedures in Auditing: A Case Study of Auswide Bank

Running head: AUDITING
Auditing
Name of the Student
Name of the University
Author’s Note

1AUDITING
Table of Contents
Requirement 3...................................................................................................................2
Requirement 4...................................................................................................................4
References.........................................................................................................................5

2AUDITING
Requirement 3
Analytical procedure is considered as one of the many audit procedures that
assists the auditors in understanding the business of the clients and changes in
business for the identification of potential risk areas so that audit procedures can be
planned accordingly (Pike, Curtis and Chui 2013). There is not any exception of this fact
in case of Auswide Bank since the auditor is needed to perform analytical procedures
for the audit of this bank. In case of the audit of Auswide Bank, the auditor undertakes
ratio analysis on the financial statements as a part of analytical procedure. Four ratios
are selected for the analytical procedures; they are Return on Assets (ROA), Return on
Equity (ROE), Net Interest Margin (NIM) and Capital Adequacy Ratio. The following
discussion provides the brief discussion on these four selected ration for Auswide Bank.
Particulars 2018 2017 2016
Return on Assets (ROA) 0.53% 0.47% 0.40%
Return on Equity (ROE) 7.67% 6.82% 5.62%
Net Interest Margin (NIM) 1.84% 1.81% 1.86%
Capital Adequacy Ratio (CAR) 14.89% 14.42% 14.31%
Table 1: Ratio Analysis of Auswide Bank
(Source: As created by Author)
Return on Assets (ROA)
Particulars 2018 ($'000) 2017 ($'000) 2016 ($'000)
Net Income (A) 17655 15009 11699
Average Total Assets (B) 3320126.5 3181194.5 2894717
Return on Assets (ROA) (A/B) 0.53% 0.47% 0.40%
Table 2: Return on Assets (ROA) of Auswide Bank
(Source: As created by Author)
ROA is a crucial ration for banks that helps in measuring the amount of net
income produced by the total assets of the bank during a specific period through the
comparison of net income to the average total assets (Khadafi, Heikal and Ummah
2014). It can be seen from the above table that there is an increase in the ROA of
Auswide Bank from 2016 to 2018. Increase in average total assets can be considered
as the main reason for the increase in this ratio. This can be considered as a positive
sign for the company.
Return on Equity (ROE)
Particulars 2018 ($'000) 2017 ($'000) 2016 ($'000)