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Expenses - Analytical Procedures

This workbook provides the form to document the following basic expense analytical procedures:
  • Compare balances in expense accounts with those of prior periods or other expectations.
  • Compare balances in various expense accounts by month within the period and with the first month after year end.
  • Compare monthly totals for expense accounts with monthly budgeted amounts.
  • Investigate any unexpected results (that is, ratios or variations different from what would be expected), considering known changes in client or industry operations or economic conditions. (Note that unexpected results, especially between the last month of the fiscal year and the first month after the fiscal year end, may indicate an improper cutoff for expenses, such as an accrual that was not made at year end.)

Entering Data

This workbook allows you to specify the percentage and dollar amount that is considered significant criteria for identifying unexpected monthly results. A red border around a cell indicates amounts that are considered unusual based on the specified criteria as follows:
  • Any individual monthly expense amount that differs from the annual average for that row by more than the specified criteria.
  • Any monthly total that differs from the monthly budgeted amount by more than the specified criteria.
  • Any monthly total that differs from the prior year monthly total by more than the specified criteria.
If you enter only a percentage criterion, then all variances greater than that percentage will be identified (with a red border) regardless of their dollar amount. If you enter only a dollar amount criterion, then all variances greater than that dollar amount will be identified regardless of their percentage. By entering both a percentage and a dollar amount, an item will only be identified as a variance if it meets both criteria.  Specifying both criteria aids efficiency by eliminating the selection of high percentage differences that are insignificant dollar amounts, or high dollar amount differences that are insignificant percentages.
The workbook provides several input rows to disaggregate total expenses to the desired level of detail [i.e., account number or category of natural expense (such as salaries, rent, and supplies) or program or other functional expense category (such as management and general, membership development and fund-raising)] and 13 columns (months) to enter expense data. For comparisons of actual expenses to budget, the user should enter the budgeted expenses in the row provided near the bottom of the worksheet. Also, if this is the first year using this workbook for a particular client, the “Monthly Totals—Prior Year” and “Monthly Totals—2 Years Ago” rows may be manually input (although the cells are shaded yellow) using data from the prior year workpapers. (See the section “General Workpaper Functionality and Tips for Entering Data” for the significance of shaded and non-shaded cells.)
A text box is provided at the bottom of the worksheet to document any identified variances and, based on discussions with management and analysis of evidence from other areas, the explanations for the variances noted. Click the mouse inside the text box to enter it. Upon entering the text box, its borders will turn green. The base size of a text box is four rows, but it has the capability to expand to accommodate as much input as necessary, and will shrink as text is removed. However, after approximately 30-35 rows of text have been entered, the size of the text box will remain fixed and a scroll bar will appear to allow for viewing of the entire entry. Note that when a scroll bar is present, only the visible portion of text is printable.
To exit the text box, either click the mouse outside of the box or hit the “Tab” Key. Upon exiting the text box, its borders will return to the normal grey color. For further explanation of textbox functionality and conditional formatting (red borders around certain cells), see the section “General Workpaper Functionality and Tips for Entering Data”.