11.27 Trend analysis compares balances in a single account or financial statement line to prior periods, budgeted amounts or industry data. Although trend analysis can be used as a substantive test, it is typically more useful as a risk assessment procedure or a concluding procedure, where lower levels of precision are acceptable.
11.28 Trend analysis is relatively easy to perform and the audit team is not required to form an explicit expectation. With trend analysis, it is presumed that the balances should be comparable with the prior periods or with the industry average; and therefore, expectations are implicit.
11.29 Trend analysis can be as simple as comparing last year’s account balance to the current year balance. In this example, the implicit expectation is the prior year amount. It is not necessary to document the expectation when using trend analysis because it is implicit.