Definition
The structure is opening balance, plus increases, minus decreases, equals closing balance. It is used for fixed assets and accumulated depreciation, debt, equity, allowances and reserves. In an audit, a rollforward also means a procedure that extends interim testing to year end by examining what changed between the two dates.
Why it matters in an audit or review
Rollforwards test the continuity of balances, tie the opening amount to the prior audited number, and show where to focus testing, usually on the additions and disposals. They are also the vehicle for finding unrecorded movement, for example disposals that never left the register.
Example
Fixed assets: opening cost $5,000,000, additions $620,000, disposals $180,000 (illustrative), giving $5,440,000 closing. The auditor agrees the opening to last year's audited statements, vouches additions over $25,000, and checks that the $180,000 of disposals came with proceeds and a recorded gain or loss. The closing agrees to the general ledger.
Common mistakes
- Letting the opening balance come from the client's file without agreeing it to the prior audited balance.
- Not testing disposals, which are easy to miss.
- Using a plug or formula that forces the closing figure to match.
FAQ
Does an interim-to-year-end rollforward need the same tests?
It needs enough to cover the remaining period, scaled to risk.
Sources
- AICPA, AU-C Section 330, Performing Audit Procedures in Response to Assessed Risks
- AICPA, AU-C Section 500, Audit Evidence
- AICPA, AU-C Section 230, Audit Documentation
Definitions paraphrase AICPA and FASB guidance; read the standard itself before relying on a requirement. Example figures are illustrative. This page is guidance, not professional advice. Report an error