ISA 520

Analytical Review
Tool

Import your trial balance, set materiality thresholds, and automatically flag significant fluctuations. Export ISA 520-compliant working papers in one click.

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Trial Balance Data

Tip: paste tab-separated data from Excel
Account NameCategoryCY BalancePY Balance

The Auditor's Guide to Analytical Procedures Under ISA 520

Complete guide: ISA 520 requirements quick reference, decision flowchart for when to use analytical procedures vs. tests of details, industry-specific ratio checklists for 12 sectors, threshold-setting guide by risk level, sample completed working paper, common quality-review findings, and documentation checklist.

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ISA 520 — Analytical Procedures: Complete Requirements

ISA 520 (Analytical Procedures) establishes the auditor's obligations when using analytical procedures as substantive procedures during the audit and as part of the overall review near the end of the audit. Analytical procedures are one of the most fundamental tools in the auditor's toolkit — they provide persuasive evidence about financial statement assertions by identifying and investigating significant fluctuations, unexpected relationships, and amounts that deviate from expectations.

ISA 520.5 — Substantive Analytical Procedures

When the auditor designs and performs substantive analytical procedures, ISA 520.5 requires four specific steps:

(a) Determine the suitability of particular substantive analytical procedures for given assertions, taking account of the assessed risks of material misstatement and any tests of details for these assertions. Not all accounts are suitable for analytical procedures — highly unpredictable balances or those without reliable comparative data may require other substantive approaches.

(b) Evaluate the reliability of data from which the auditor's expectation of recorded amounts or ratios is developed, considering the source, comparability, nature and relevance of the information, and controls over its preparation. Internal data generated by a robust ERP system with effective IT controls is more reliable than manually maintained spreadsheets.

(c) Develop an expectation of recorded amounts or ratios and evaluate whether the expectation is sufficiently precise to identify a misstatement that, individually or when aggregated with other misstatements, may cause the financial statements to be materially misstated. A vague expectation ("revenue should be roughly similar to last year") is insufficient — the auditor must quantify the expected amount or range.

(d) Determine the amount of any difference of recorded amounts from expected values that is acceptable without further investigation — this is the investigation threshold. This tool implements this requirement through the dual threshold system: both a percentage threshold and an absolute (materiality-based) threshold must be exceeded before an item is flagged.

ISA 520.6 — Mandatory Analytical Procedures at Completion

ISA 520.6 is not optional — the auditor shall design and perform analytical procedures near the end of the audit that assist in forming an overall conclusion as to whether the financial statements are consistent with the auditor's understanding of the entity. This is distinct from planning-stage analytical procedures (ISA 315) and substantive analytical procedures. The completion-stage analytical review is a final sense-check: does the overall picture presented by the financial statements make sense given everything the auditor has learned during the engagement?

ISA 520.7 — Investigation of Significant Fluctuations

When analytical procedures identify fluctuations or relationships that are inconsistent with other relevant information or that differ from expected values by a significant amount, the auditor shall investigate such differences by inquiring of management and obtaining appropriate audit evidence relevant to management's responses, and performing other audit procedures as necessary. Management explanations alone are not sufficient — the auditor must corroborate them with independent evidence.

Four Analytical Methodologies

1. Trend Analysis — the core methodology implemented in this tool. Compares current year to prior year (and optionally second prior year) balances, calculating absolute and percentage changes. Simple, widely applicable, and the most commonly used analytical procedure in practice.

2. Ratio Analysis — calculates key financial ratios (gross margin, current ratio, etc.) for CY and PY and identifies significant changes. This tool automatically calculates ratios from your entered data; use the Financial Ratio Calculator for more comprehensive analysis.

3. Reasonableness Testing — the auditor develops an independent expectation using non-financial data (e.g., revenue = units × price, payroll = headcount × average salary) and compares to the recorded amount. This provides stronger evidence than trend analysis because the expectation is independently derived.

4. Regression / Predictive Analysis — uses statistical techniques to identify expected values from historical data patterns. Most applicable when multiple years of data are available and relationships are stable and predictable.

The Dual Threshold System — Why Both Thresholds Matter

Consider three scenarios to understand why a dual threshold is necessary:

Scenario 1: Office supplies increased from €200 to €600 — a 200% change. But the absolute change is only €400, well below any reasonable materiality level. A percentage-only threshold would flag this, wasting audit time on an immaterial fluctuation.

Scenario 2: Revenue increased from €10,000,000 to €10,300,000 — a 3% change. The absolute change is €300,000, but this falls within reasonable business variation when materiality is €500,000. An absolute-only threshold might flag this unnecessarily.

Scenario 3: Operating expenses increased from €3,000,000 to €3,500,000 — a 16.7% change with an absolute change of €500,000. With a 10% threshold and €325,000 materiality, BOTH thresholds are exceeded. This correctly flags the item for investigation.

Data Reliability Assessment (ISA 520.5(b))

The persuasiveness of analytical procedures depends on the reliability of the underlying data. The auditor should consider: whether the data source is internal or external (external sources are generally more reliable); whether the internal data was produced by a system with effective controls; whether the data was prepared independently of the financial reporting process; and whether the data was subject to audit testing in the current or prior periods. Trial balance data imported into this tool should be reconciled to the general ledger, which itself should be subject to IT general controls assessment.

Import Your Trial Balance in Seconds

The CSV and Excel import feature eliminates the most time-consuming part of analytical review: manual data entry. Export your trial balance from your accounting software (Xero, QuickBooks, SAP, or any system that produces CSV/Excel), drag it into the import zone, map the columns in 30 seconds, and your data is ready for analysis. The tool handles European number formats (comma decimal separators), missing values, and common data quality issues automatically. What used to take 20-30 minutes of manual entry now takes under a minute.

Frequently Asked Questions

What is an ISA 520 analytical review?
ISA 520 (Analytical Procedures) requires auditors to design and perform analytical procedures near the end of the audit that assist in forming an overall conclusion as to whether the financial statements are consistent with the auditor's understanding of the entity. Analytical procedures involve evaluating financial information through analysis of plausible relationships among both financial and non-financial data. They include the investigation of identified fluctuations or relationships that are inconsistent with other relevant information or that differ from expected values by a significant amount.
How does the dual threshold flagging system work?
The dual threshold system prevents false flags by requiring BOTH conditions to be met before flagging an item for investigation: the percentage change must exceed the threshold percentage (e.g., 10%) AND the absolute change must exceed the materiality amount (e.g., performance materiality). This prevents two types of false positives: large percentage changes on immaterial balances (e.g., a 200% increase on a €500 balance) and small percentage changes on large balances that are still within materiality (e.g., a 3% change on €10M revenue when materiality is €500K). Sign changes — where a balance moves from positive to negative or vice versa — are always flagged regardless of thresholds because they indicate a fundamental change in the nature of the account.
What investigation thresholds should I set for analytical review?
Threshold setting depends on account type and assessed risk. Common practice ranges are: revenue and COGS at 5-10% (tighter because small percentage changes represent large absolute amounts), operating expenses at 10-15%, material balance sheet items at 5-10%, immaterial balance sheet items at 15-25%, and discretionary costs at 15-25%. The absolute threshold is typically set at performance materiality (50-75% of overall materiality). Higher-risk engagements warrant tighter thresholds. The tool allows both global defaults and per-category overrides to match your professional judgment.
Can I import trial balance data from Excel or CSV?
Yes — this is a key feature of the tool and a major time-saver versus manual entry. You can import trial balance data from .csv, .xlsx, or .xls files using the Import mode. After uploading, a column mapping interface lets you match your file's columns to the tool's fields (account name, category, current year, prior year, etc.). The tool handles common data quality issues including extra whitespace, European-format numbers (comma as decimal separator), missing values, and non-numeric characters in number columns. A 5-row preview lets you verify the mapping before importing.
What does the PDF working paper export include?
The PDF export generates a professional ISA 520-compliant working paper suitable for inclusion in your audit file. It includes: a header with client name, reporting period, preparer, and reviewer; the objective statement referencing ISA 520; the materiality and threshold parameters used; the complete comparison table with conditional formatting; a dedicated section listing all flagged items with the auditor's explanations and investigation status; the overall conclusion; and sign-off fields for both preparer and reviewer with dates. This structured format satisfies quality review requirements and demonstrates compliance with ISA 520.5-520.7.
How does the tool handle edge cases like PY = 0 or sign changes?
The tool handles all critical edge cases: when PY is zero, the percentage change shows 'N/A' and the item is labelled 'New in CY' — it is flagged based on absolute change only. When CY is zero with a non-zero PY, the percentage shows -100% and the item is labelled 'Discontinued'. Sign changes (positive to negative or vice versa) are ALWAYS flagged regardless of threshold settings because they represent an inherently significant change in the nature of the balance. Negative balances in denominators use absolute values for percentage calculations to avoid misleading results.
What is the difference between trend analysis and reasonableness testing?
Trend analysis (the primary methodology in this tool) compares CY to PY balances and identifies significant fluctuations — it answers 'has this balance changed significantly?' Reasonableness testing goes further by developing an independent expectation of what the balance should be based on operational data (e.g., expected revenue = units sold × average price, or expected payroll = headcount × average salary) — it answers 'is this balance reasonable given what we know about the business?' Both are valid analytical procedures under ISA 520, but reasonableness testing provides stronger audit evidence because the expectation is independently derived.
Is the tool suitable for both planning and completion stage analytics?
Yes. ISA 315 requires analytical procedures during risk assessment (planning stage) to develop an understanding of the entity and identify areas of potential misstatement. ISA 520.6 requires analytical procedures near the end of the audit to form an overall conclusion. This tool supports both: at planning, use it with preliminary trial balance data to identify significant fluctuations that should inform the audit strategy. At completion, use it with final trial balance data to confirm that the financial statements are consistent with the auditor's understanding after all audit procedures have been performed.
How does the tool calculate ratios automatically?
The tool automatically calculates key financial ratios from your entered trial balance data when sufficient line items exist. It identifies revenue, COGS, operating expenses, current assets, and current liabilities from the category classifications you assign, and calculates gross margin, operating margin, and current ratio for both CY and PY. Changes in these ratios are highlighted. For more comprehensive ratio analysis including inventory turnover, DSO, DPO, and Z-Score, use our dedicated Financial Ratio Calculator tool.
Why is analytical review called the 'killer app' for auditors?
Analytical procedures are mandatory at both the planning (ISA 315) and completion (ISA 520.6) stages of every single audit engagement — unlike sampling or going concern assessments which vary by engagement. A firm with 100 audit clients performs analytical review 200-400+ times per year. The current workflow involves manual Excel spreadsheets with ad-hoc formulas, no standardised flagging logic, and no visual representation — typically taking 30-60 minutes per client. This tool standardises the process, applies consistent dual-threshold logic, and produces ready-to-file working papers. It addresses the most frequent audit task with the widest competitive gap in available free tools.

Industry-Specific Analytical Review Tools

Manufacturing Retail Banking & Financial Services Insurance Real Estate Healthcare Technology Energy & Utilities Construction Nonprofits & Charities Government & Public Sector Transportation & Logistics Hospitality & Tourism Agriculture & Agribusiness

Related Audit Tools

ISA 320 — Materiality Calculator Ratio Analysis — Financial Ratio Calculator ISA 570 — Going Concern Checklist