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Auditing & Assurance › Analytical Procedures

What is trend analysis?

Beginner

Answer

Trend analysis examines how account balances or ratios move over multiple periods to identify unusual changes or patterns. A line item deviating from its historical trend, or a trend inconsistent with known business changes, signals a possible misstatement or a matter to understand and test further.
Real-world example A repairs expense trending flat then spiking prompts the auditor to check whether capital items were wrongly expensed.

Common follow-ups: What does a break in trend suggest? | How many periods are useful for trend analysis?