Configuration
Trial Balance Data
| Account Name | Category | CY Balance | PY 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.
Analytical Review Under ISA 520 in the Netherlands
The Netherlands has adopted ISA 520 Analytical Procedures as part of its auditing standards framework, implemented through the Nederlandse Beroepsorganisatie van Accountants (NBA). Dutch auditors, known as registeraccountants (RAs) and accountant-administratieconsulenten (AAs), are required to apply ISAs as adopted by the NBA in the performance of all statutory audits. The Autoriteit Financiële Markten (AFM) exercises oversight of audit firms that audit public interest entities, while the NBA's Raad voor Toezicht provides quality oversight for audits of non-PIE entities performed by SRA-affiliated firms. The Netherlands has a well-established tradition of quantitative analytical procedures, with Dutch audit methodology historically placing significant emphasis on data-driven analysis and statistical techniques. ISA 520 requires auditors to apply analytical procedures as substantive procedures when the auditor's risk assessment identifies opportunities to obtain sufficient appropriate audit evidence through the analysis of plausible relationships among financial and non-financial data. The standard also mandates analytical procedures near the end of the audit to form an overall conclusion. Dutch audit practice has evolved to integrate advanced data analytics into the analytical review process, reflecting the AFM's expectation that audit firms leverage technology to enhance audit quality.
AFM Supervision and Inspection Findings
The AFM's annual inspection reports have consistently identified analytical procedures as one of the areas where Dutch audit firms need to improve quality. The AFM conducts thematic and regular inspections of both Big Four and non-Big Four firms, publishing findings that provide transparency about audit quality trends. Key AFM observations regarding analytical procedures include the following recurring themes. First, the precision of the auditor's expectation is frequently insufficient to provide meaningful assurance — auditors develop high-level expectations based on general assumptions rather than building detailed models incorporating entity-specific drivers. Second, the investigation of differences between expected and recorded amounts does not always meet the standard required by ISA 520, with auditors too readily accepting management explanations without performing additional procedures to corroborate those explanations. Third, the documentation of analytical procedures, while generally present, often lacks sufficient detail to demonstrate the rigour of the auditor's thought process, including the basis for the expectation, the threshold applied, and the rationale for the conclusion reached. The AFM has published sector-specific reports and thematic letters to audit firm boards highlighting these findings and requiring remediation plans. The Kwartiermakers (transition committee) appointed by the Minister of Finance to oversee audit sector reform have also addressed analytical procedures as part of their broader recommendations for improving audit quality in the Netherlands.
Dutch GAAP Considerations for Analytical Review
Dutch entities that report under Dutch GAAP (Titel 9 Boek 2 Burgerlijk Wetboek) apply accounting standards issued by the Raad voor de Jaarverslaggeving (RJ — Dutch Accounting Standards Board). The RJ guidelines create specific analytical review considerations that differ from IFRS-based audits. Dutch GAAP permits a choice between current-cost and historical-cost accounting for certain assets, and the treatment of pension obligations, financial instruments, and revenue recognition differs from IFRS in ways that affect the expected relationships between financial statement line items. For example, the RJ guidelines on revenue recognition still follow a framework closer to the former IAS 18 rather than IFRS 15, which affects revenue trend analysis. Auditors performing analytical procedures on Dutch GAAP financial statements must develop expectations that reflect the specific measurement and recognition bases used, rather than applying IFRS-based assumptions. The interaction between Dutch GAAP and Dutch tax accounting further complicates analytical review, as many smaller Dutch entities maintain close alignment between their financial reporting and tax reporting, creating tax-driven accounting choices that affect reported profitability and balance sheet composition.
Data Analytics and Quantitative Techniques in Dutch Audit Practice
The Netherlands has been at the forefront of incorporating data analytics into audit methodology, and this trend has significantly influenced the practice of analytical procedures. The AFM has encouraged audit firms to invest in data analytics capabilities, and several Dutch firms have developed proprietary tools for automated trend analysis, predictive modelling, and anomaly detection. The NBA has issued guidance on the use of data analytics in the audit, including considerations for the reliability and completeness of data used in automated analytical procedures. Dutch universities, including those in Amsterdam, Rotterdam, and Tilburg, have contributed academic research on the application of statistical and machine learning techniques to audit analytical review. In practice, Dutch auditors increasingly use regression analysis, time-series forecasting, and ratio analysis benchmarked against Centraal Bureau voor de Statistiek (CBS) industry data to develop more precise expectations. The CBS publishes extensive economic and sector-specific statistics that provide independent benchmarks for analytical procedures, including revenue per employee, margin analysis, and industry growth rates. The Kamer van Koophandel (KVK — Chamber of Commerce) also provides business registration and filing data that can inform the auditor's understanding of the entity's market position. Despite these advances, the AFM has noted that the quality of data analytics implementation varies significantly across firms, and that the use of advanced techniques does not automatically translate into higher-quality analytical procedures if the auditor does not exercise appropriate professional judgement in evaluating the results.
Common Inspection Findings — AFM (Authority for the Financial Markets) / NBA (Royal Netherlands Institute of Chartered Accountants)
The following are typical findings from AFM (Authority for the Financial Markets) / NBA (Royal Netherlands Institute of Chartered Accountants) inspections relating to analytical procedures:
Insufficient precision in the auditor's expectation — expectations based on high-level assumptions rather than entity-specific operational data and external benchmarks
Management explanations for significant fluctuations accepted without obtaining corroborating evidence through additional audit procedures
Documentation of analytical procedures lacks sufficient detail to demonstrate the rigour of the methodology, threshold-setting, and evaluation process
Data analytics outputs used without adequate evaluation of data completeness, reliability, and the appropriateness of the analytical model applied