The Preliminary Analytical Review - Financial workpaper is designed to be completed at the planning stage of the engagement as it allows you to incorporate interim data and budget data into your review.
To assist you in completing the Preliminary Analytical Review - Financial workpaper, we've broken our instructions down into 3 easy steps:
Step 1 - Setting Your Materiality and Tolerable Variance
The first step to completing your analytical review is to set your materiality and tolerable variance and then determine the period (or financial data) that you want to use in your preliminary analytics. These fields are linked to the analytical review and will help you identify accounts that may be material or immaterial.
When you first open your analytical worksheet, the materiality fields will appear like this:
The first step is to complete the overall materiality and performance materiality. To do this, simply:
- Select the lock icon to enable edit mode (the icon will appear when you hover your mouse over the relevant fields);
- Type in your overall materiality and performance materiality;
- The data will save automatically, so you can move to the next step.
To complete your tolerable variance, simply:
- Place your cursor in the text box and type your tolerable variance;
- This data will also save automatically.
To choose the period (financial data) to be used for the preliminary analytics, simply:
- Select the drop-down menu;
- Select the period to be used.
Note: You may need to set the interim date if you have chosen not to import the data into your trial balance.
At any time, you can update any of these fields.
Step 2 - Completing Your Review
1. Financial Data
Your analytical review is populated with the financial data that is stored in your trial balance and is allocated based on the 'type' you selected when you mapped your trial balance.
If you select the Use budget figures tickbox in the materiality toolbar, the financial data table will expand to include a Budget column to allow you to manually input the budget data. Comparison to the budget section will also be added to the table which will use the budget figures to calculate Variance.
Within the description of each row, you will also see a comment icon. Once you select the icon, you can enter a comment for that row. The comment icon will change its display colour to red to indicate that a comment has been provided.
You can also add comments from the Comments column on each row. When the page is refreshed, the comments will be updated so that the comments in the icon and the comment column match the individual rows.
2. Making Your Audit Assessment
The next section of the analytical workpaper allows you to make an audit assessment as to whether an account area is considered material or immaterial.
The material column automatically calculates for you whether the current year or prior year figures are greater than the performance materiality. If either period is greater than the performance materiality, then the word 'Yes' will be returned.
The Material column automatically calculates whether the current year or prior year figures are greater than the performance materiality. If either period figures are greater than the performance materiality, then the word 'Yes' will be returned. This column is not editable.
The Assessed as material by the auditor column determines whether you agree with the material assessment. If an account is deemed to be material by the auditor, then you should select Yes from the drop-down menu. If you think that the account is not material, then you must select No. You can also add a comment in this column by selecting the gray triangle icon on the top left corner of the cell. Once a comment is provided, the colour will change to red to indicate a comment has been provided.
3. Comparison to Prior Period and Budget
The final section of the analytical workpaper will calculate the variance between the current year's data and the prior year's data. The significant variance column will return a 'Yes' result if the variance % is greater than the tolerable variance. If you selected to display budget data, you will also see a comparison or budget section appear in your analytical review workpaper.
Step 3 - Document Further Notes and Complete the Conclusion
Once you've completed your analytical review, the final step is to document further notes in the comment boxes provided and complete your conclusion.
Re-Populate Analytical Review Workpaper
If adjustments have been made to the trial balance or the accounting structure and you want the Analytical Review worksheet to be updated with the latest data, use the Re-populate button which is displayed inside the financial data table.
If the table has never been re-populated, the date will be displayed as N/A. Once the re-populate button has been used, the date will be updated to the last re-populated date.
Using this Re-populate button will update the data inside the table to the latest figures in the Accounting structure. Please bear in mind that some data/information might be lost if the Accounting Structure is different.