The formulas
- Expected = prior year x (1 + volume change) x (1 + price change)
- Difference = recorded - expected
How it works
A substantive analytical procedure starts with an expectation built from independent data. For revenue and many costs, the expectation is last year adjusted for the change in volume and in price. The two effects compound, so they are multiplied, not added.
Compare the recorded balance to the expectation. A difference above your threshold must be investigated and corroborated. The tool does not set the threshold. It depends on materiality and on how precise and reliable the data behind the expectation are.
Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
Why multiply and not add?
Price applies to the new volume, so a 6 percent and 3.5 percent move give 9.71 percent, not 9.5 percent.
Where do the drivers come from?
Independent sources such as unit data, rate cards and external prices.
How do I set the threshold?
Use your analytical threshold work, tied to tolerable misstatement and the desired precision.
Formulas on this page are the standard definitions.
Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.