How do you investigate significant fluctuations found by analytical procedures?

Intermediate

Answer

Inquire of management for explanations, then corroborate those explanations with other evidence (documents, recalculation, tests of details)—don't accept them at face value. If the variance remains unexplained or the explanation isn't supported, perform additional substantive procedures. Unexplained significant differences may indicate misstatement.

Real-world example Management attributes a margin drop to a price cut; the auditor corroborates it against approved price lists before accepting it.

Common follow-ups: Why corroborate management's explanation? | What if the variance stays unexplained?

Audit Evidence & Procedures Fraud & Error Responsibilities Analytical Procedures

All 18 Analytical Procedures questions