Summary

Forecasting helps you establish an independent, data-driven baseline expectation using historical general ledger data.

The feature provides 12-month baseline forecasts for operating revenue and operating expenses. You can use these results to review projected financial trends, compare results against management's forecast, identify areas that may require further inquiry, and support your forecasting procedures.

Forecasting supports your assessment but does not determine whether an entity is a going concern or replace management's forecast. Apply professional judgment when interpreting forecast results and determining whether additional audit evidence is required.

How forecasting works

Forecasting uses historical general ledger data to generate separate baseline forecasts for:

• Operating revenue
• Operating expenses

The forecast displays historical results alongside projected results to help you establish an independent expectation of future financial performance.

For operating revenue and operating expenses, the forecast uses historical cumulative balance patterns to estimate expected future activity.

A 95% confidence interval is included to illustrate a range of reasonably possible outcomes. Forecast results are estimates based on historical evidence and should not be interpreted as predictions of future results.

Using forecasting

You can use forecasting to:

• Establish an independent baseline forecast using historical general ledger data.
• Review projected trends in operating revenue and operating expenses.
• Compare forecast results against management's forecast and assumptions.
• Identify significant differences or financial trends that may require further investigation.
• Support discussions about forecast assumptions and forecast reasonableness.
• Export forecast graphs and supporting data for use in working paper documentation.

Review forecast results

Forecasting provides interactive visualizations of historical and projected financial information.

Depending on the forecast, you can:

• Review historical and projected results in a visual graph.
• Switch between balance and flow views, where available.
• Review forecast data by monthly, quarterly, or yearly periods.
• Hover over the visualization to review additional details.
• Zoom in to review specific periods and trends.

When reviewing forecast results, consider whether projected changes indicate areas that require further inquiry or additional audit evidence.

Export forecast results

You can export forecast graphs and supporting data tables for use in working paper documentation.

Exported results can help document the independent expectation used when reviewing management's forecast and provide supporting evidence for your forecasting procedures.

Considerations

Forecasting uses historical general ledger data and observed business patterns to establish a baseline. Historical activity may not always reflect an entity's current or future operating conditions.

Consider whether additional evidence or professional judgment is required when:

• The entity has experienced significant structural changes.
• The entity has undergone acquisitions or disposals, introduced new business lines, or changed accounting policies.
• Historical data may not reflect current or future operating conditions.
• There are known liquidity issues, covenant concerns, or funding constraints.
• External market conditions have changed significantly.
• Management's forward-looking assumptions are not reflected in historical general ledger activity.
• Forecast results differ significantly from management's forecast.
• The lower end of the forecast range indicates potential concerns.

Forecast outputs should be interpreted as estimates based on historical evidence, not guaranteed predictions of future results.