The article gives tips to enhance your preliminary analytical review procedures.
How does this add value to your audit?
- Analysis over multiple periods allows you to visualize trends of balances, flows of transactions and key ratios over time. If 5 years of client data is available – “expected ranges” will also be available for key ratios on the visualizations – whereby actual results outside of these ranges are exposed for investigation. By grounding the preliminary analytical procedures in a broader assessment of trends in the business and relevant key performance indicators (i.e., ratios), the result is a more operationally relevant assessment of what’s changed in the financials.
- By risk scoring all transactions in the general ledger and stratifying into High, Medium and Low risk – on the Risk Overview tab – a Risk Burst is available which rolls up the risk at the transaction level to a score and designation of transactional risk at the account level. This can be a high-value input to your preliminary analytical procedures that allows you to flag certain accounts (and their transactions, via an easy drill-through) to focus and consider risk as another “data point” together with year-over-year trends.
- Using the data table to interrogate the detail of certain accounts and “scan” the transactions, you’re able to better understand an explanation provided by the client or get a sense of what types of transactions are contributing to a certain observed high-level variance or an increased account-level risk score from previous years.
- Tip 2: Streamline Your Journal Entry Testing
- Tip 3: Leverage the Intelligent Sampler for Tests of Details
- Tip 4: Focus Your Revenue Cutoff Testing
- Tip 5: Search for Related Party Transactions