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Tip 1: Enhance your Preliminary Analytical Review procedures

Article author
Jonathon Plowman-Samson
  • Updated

Summary

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.

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