During the risk assessment phase of an audit, additional analyses and reports are typically run and documented in the following situations:
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When auditing public entities, entities in regulated industries, or other public interest entities: In these cases, the complexity and scrutiny of the entity's operations may warrant more extensive analytical procedures due to higher public interest or regulatory requirements.
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When unusual fluctuations or a lack of expected fluctuations are identified: If there are unexpected variations in the financial data, it may signal the need for further investigation to understand the reasons behind these anomalies.
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When requested by management: Although not a standard practice, auditors may perform additional analyses and document reports if management requests closer examination of specific areas or transactions.
On the other hand, when the year-over-year increases in revenues and expenses align with expectations, it might not be necessary to perform additional analyses and reports as part of risk assessment, assuming there are no red flags or indicators of misstatement. However, it's crucial to maintain professional skepticism, and if the auditor believes that the financial information appears too good to be true or seems implausibly consistent, additional procedures might still be justified to validate the numbers.
