The Role of Applying Analytical Procedures in Accordance with International Standard (520) in Reducing Audit Risks: A Field Study on Auditors in Accounting and Legal Audit Firms in Libya

Abstract

This study aimed to investigate "The Role of Applying Analytical Procedures in Accordance with International Standard on Auditing (ISA 520) in Reducing Audit Risks," with an application to accounting and legal auditing offices in Libya. To achieve this objective, the study adopted a descriptive-analytical approach, utilizing a questionnaire distributed to a sample of (67) auditing practitioners (office owners, partners, and auditors).

The study concluded that ISA 520 plays a fundamental and effective role in mitigating the three components of audit risk. The results demonstrated that analytical procedures contribute to reducing Inherent Risk by enhancing the understanding of the entity's nature and assessing management integrity. Furthermore, they help diminish Control Risk by evaluating the efficiency of the segregation of duties and identifying gaps in the internal control structure. The study also revealed that the most prominent role of analytical procedures lies in reducing Detection Risk, as they enhance the auditor's professional judgment and simplify the analysis of complex and voluminous data, thereby reducing the likelihood of the auditor's failure to detect material misstatements.

Based on these findings, the study recommended that professional regulatory bodies in Libya should issue practical guidelines to promote the use of this standard. Additionally, it emphasized the need to intensify training programs for auditors to improve their proficiency in using modern statistical and technical methods when performing financial analyses, ensuring the enhancement of audit quality within the Libyan professional environment.