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Write a short note on “Analytical review”.

Write a short note on “Analytical review”.

Write a short note on “Analytical review”.

Chiranjibi Aug. 08, 2018

Let's see a case

The sale of a company has increased by 20% in the current year.

Analytical Review in this scenario would be to see if the accounts receivable in this case has also increased by similar amount.

Say, if the proportional change in receivables is greater than the increase in sales, this could be caused by several issues, such as a reduced collections effort or extending credit to lower-quality customers.

In both cases, a larger reserve for bad debts is indicated. And this indication is the result of the analytical review.

Analytical reviews can be quite useful for spotlighting general areas in which financial statements are incorrect or where transactions have been mis-classified.

Once the analysis identifies areas of concern, the auditor must conduct a further investigation in order to pinpoint the source of the underlying problem.