These are simple analytical procedures that do not require any complex calculations of software. Single-variable analytical procedures are comprised of four main types:
- Comparing recorded amounts to same period budget amounts
Large variances can alert the practitioner to do further analysis to determine if errors have been recorded in the general ledger. However, the usefulness of this technique is limited to the ability of the client to prepare reasonable and realistic budgets.
- Horizontal or trend analysis
Compares current amounts to prior periods for a single financial statement component such as sales. This analysis is used to determine the relative change in amounts between years. Sizeable changes warn the practitioner that further investigation may be required. Disaggregating the data can improve the usefulness of such a technique. An example of this would be disaggregating total sales in to sales by product, region, key customer, etc.
- Vertical or common-size analysis
Computes components of one year's financial statements as a percentage of a base amount, such as total assets as the base amount for the balance sheet and net sales as the base amount for the income statement. Results of this analysis can be compared to prior years within the same company or compared to industry norms.
- Reviewing pertinent information obtained from various sources
Examples include, but are not limited to:
- industry statistics;
- subsidiary ledgers;
- adjusting journal entries;
- general ledger control accounts;
- suspense accounts; and
- scanning items in transaction listings
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