Generally I am a proponent of graphs and tables. I think that when presenting data in due diligence or collateral examination reports, graphs and tables present it in a pure and unbiased state.
Pure data is the best way to underscore a point or opinion. For example, if after performing test counts an examiner determines that there is a need for a reserve due to large negative variances, a table that shows this will only help support this position. A table that is formatted and presented efficiently will help the reader understand the issue quickly and easily.
By the same token, the written word is a powerful tool. If you are going to employ a narrative style to your reports, then I would suggest that you make use of special formatting tools such as bold, italic and underline typefaces, as well as bullet points, numbering and indenting. In addition, whenever possible keeping the narrative succinct and in active voice will help keep the reader on point and focused.
Consider the following presentations (please note the tables and comments presented are for illustrative purposes only, reports prepared by ECG Collateral Services follow industry wide conventions and are generally more informative and detailed):
Presentation 1
Below is a recap of the test count results:
| Variance | # of Items | $ Amount Tested | % of the Amount Tested |
| 0-5% | 15 | 2,400 | 60% |
| Over 5% | 10 | 1,600 | 40% |
| Total | 25 | $4,000 | 100% |
The results indicate the need for a reserve as 40% of the amount tested had variances in excess of 5%,
Presentation 2
The examiner selected 25 items from the company’s inventory listing for the purpose of performing test counts. The test counts resulted in 15 items totaling $2,400, or 60% of the amount selected as having variances that were under 5%. The test counts also resulted in 10 items totaling $1,600 or 40% of the amount tested having variances in excess of 5%. These results may indicate the need for a reserve as the amount of inventory with large variances might be considered material (40% of the amount test had variances in excess of 5%).
Presentation 3
The examiner selected 25 items for the purpose of performing test counts. The following results and observations were noted:
- 15 items totaling $2,400, or 60% of the amount selected had variances that were under 5%.
- 10 items totaling $1,600 or 40% of the amount tested had variances in excess of 5%.
- These results indicate the need for a reserve as the amount of inventory with large variances was material
Conclusion
For my money, Presentations 1 and 3 get the message across to the reader in a direct and efficient manner. Presentation 2, although it basically has the same message, takes much more effort on the part of the reader to discern what exactly the writer is trying to convey.
At the risk of perhaps sounding a lot like Dilbert in the comic above, I would suggest that Presentations 1 and 2 be combined. This way the reader that likes words can concentrate on the narrative section, while the reader that is more numbers oriented can concentrate on the table.
Suggested Presentation
| Variance | # of Items | $ Amount Tested | % of the Amount Tested |
| 0-5% | 15 | 2,400 | 60% |
| Over 5% | 10 | 1,600 | 40% |
| Total | 25 | $4,000 | 100% |
The examiner selected 25 items for the purpose of performing test counts. The following results and observations were noted:
- 15 items totaling $2,400, or 60% of the amount selected had variances that were under 5%.
- 10 items totaling $1,600 or 40% of the amount tested had variances in excess of 5%.
- These results indicate the need for a reserve as the amount of inventory with large variances was material
I hope the above is helpful. If anyone has suggestions, comments or questions that they would like to see addressed in future posts, please feel free to leave a comment.
Thanks for your time….
