Your Ask Joey ™ Answer

Why would the audit team compare sales trends on a quarterly or annual basis?

The main reason is to understand and developments in the business and begin to assess the reasonableness of any fluctuations in revenue. This analysis is known as analytical procedures.

The visual below illustrates how the audit team could compare quarterly sales and the type of explanation a CEO could provide for why sales increased (or decreased). If the CEO doesn’t provide a good explanation, then the audit team will need to dig in and understand if there is anything fraudulent going on.


Back To All Questions

You might also be interested in...

  • Three Reasons to Become an Accountant

    If you’re someone who is intrigued by numbers, enjoys problem-solving and wants to help others, then accounting might be the perfect career for you. While some people may be put off by its unalluring reputation, accounting is an excellent career choice that has many benefits. In this article, we look at three of the reasons...

  • Qualified Retirement Planning: Tax Advantages & Disadvantages

    Home Advantages and Disadvantages of Tax-Free and Deferred-Tax Retirement Plans What are “qualified retirement plans” and how can they be effective for tax planning? Well, there are plenty of tax savings advantages to individuals contributing to tax-free retirement accounts, as well as tax-deferred retirement accounts. However, this doesn’t necessarily mean that there are no disadvantages...

  • CPA Evolution Survival Guide

    Download Your eBook by selecting the download icon in the top right-hand corner