TE Threshold
Formalize how much work each caption deserves — balance sheet and P&L alike.
- General ledger alone
- Compares with last year
What it checks
- Movement > 10× TE, or balance > 10× TE: Significant — full substantive testing.
- Movement > TE up to 10× TE: Limited — analytics plus a corroborating test.
- Movement ≤ TE but balance > TE: Limited — a static balance is not a tested balance.
- Movement ≤ TE and balance ≤ TE: Insignificant, unless the qualitative override applies.
- A P&L caption has no balance: it tiers on the year’s postings against the same cut points.
- Qualitative override promotes a caption to Significant at any size.
- The 10× multiple is a stated house convention, not a derived figure.
How the result is read
This test turns the statement analytics into an audit programme, so the cut points are stated rather than felt. Two thresholds, not one: the movement says how much changed, the balance how much is exposed, and a movement-only rule is blind to stagnant stock and dormant intercompany. Size is not the whole basis, so the numeric tiers carry a qualitative override.
The worksheet, on the demo engagement
TE Threshold, as the application draws it for Harrow Precision Engineering Ltd, the fictional demo engagement — one row per level 3 FSLI caption.
Only the captions tiered Limited or Significant — the ones over tolerable error. Signed: a bar below the line is a caption that fell. The captions inside TE are left off; they are on the grid.
- Tolerable error (TE)
- 500
- Significant if
- > 10x TE
- Accounts scanned
- 48
- Significant (> TE)
- 4
TE thresholding. Two thresholds, not one: the movement says how much changed, the closing balance says how much is exposed, and the tier is taken from whichever is higher — a caption that did not move but carries a large balance still holds risk. Significant is movement or balance above 10x TE and takes full substantive testing; Limited is above TE up to that, and takes analytical procedures with a corroborating test. Decreases carry their sign in both the absolute and the percentage column.
Result grid6 of 10 rows
| Account | CY balance | PY balance | Delta Abs | Delta % | Exceeds TE |
|---|---|---|---|---|---|
| 4000 Revenue | 64,200 | 51,300 | +12,900 | +25.1% | +12,900 >> TE |
| 1200/1210 Trade receivables | 9,840 | 6,120 | +3,720 | +60.8% | +3,720 >> TE |
| 5000 COGS — Materials | 24,300 | 17,200 | +7,100 | +41.3% | +7,100 >> TE |
| 6800 Restructuring charge | 2,000 | 0 | +2,000 | n/m | +2,000 (new item) |
| 2700 LT Borrowings | 14,000 | 16,000 | (2,000) | (12.5%) | (2,000) >> TE |
| 6100 Selling & marketing | 9,140 | 7,020 | +2,120 | +30.2% | +2,120 >> TE |
In the application
TE Threshold is filed under Journal entries, index letter B. "Run all analyses" runs it with every other analysis the ledger can answer. The worksheet states the population it tested on its face — or "Not applicable" with the reason when a column it depends on is empty — and the Excel workbook the engagement exports files it under B, beside an index of the source files with their SHA-256 fingerprints.
Read it with
Run your next audit file test without the Excel crash.
One free engagement to evaluate, valid 60 days. The ledger never leaves the machine.
- 20 minutes
- Runs on a fictional engagement
- No client data required