Preanalytical review refers to going through/analyzing the numbers in the financial statement at planning stage of audit. This exercise aims to understand the numbers, financial transactions, and balance movement to identify the risk of potential misstatement in the context of trend analysis, comparative accounting period, contextual relations, market trends, etc.
A preanalytical review is performed in the initial phase of audit execution. It’s an essential component of understanding the business and related risk analysis.
It’s important to note that ratio and trend analyses are essential tools when performing preanalytical reviews.
On the other hand, the financial analytical review is performed while forming an audit opinion. It’s a final review of the numbers/balances before the audit report is signed. At this point, the auditor needs to ensure they have developed a reasonable understanding of the fluctuations they identified in the financial statement.
Wrap up
Preanalytical review refers to performing analytical procedures while planning/scoping for the audit. It’s a great tool to assess the risk of material misstatement and identify areas creating risk via trend analysis, ratio analysis, market compatibility, and other tools and techniques used in the analytical procedures.
On the other hand, final analytical review refers to performing analytical procedures while concluding the audit. The purpose of performing a final analytical review is to ensure the auditor has obtained sufficient and appropriate audit evidence for the financial statement areas that were assessed risky. It helps ensure the audit is conducted systematically.
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