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Perform Audit Testing in Excel

1) Sampling is used in audits to provide reasonable conclusions about populations when testing 100% is impossible or too costly. The two main sampling approaches are statistical and non-statistical, both requiring auditor judgement. 2) The two most commonly used statistical sampling methods are random sampling and monetary unit sampling. Random sampling gives all items an equal chance of selection while monetary unit sampling gives equal chance based on dollar amounts. 3) Monetary unit sampling requires specialized software due to complex calculations but this Excel spreadsheet demonstrates it can also be done in Excel, making it accessible to more auditors.

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Tao Li
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© Attribution Non-Commercial (BY-NC)
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498 views

Perform Audit Testing in Excel

1) Sampling is used in audits to provide reasonable conclusions about populations when testing 100% is impossible or too costly. The two main sampling approaches are statistical and non-statistical, both requiring auditor judgement. 2) The two most commonly used statistical sampling methods are random sampling and monetary unit sampling. Random sampling gives all items an equal chance of selection while monetary unit sampling gives equal chance based on dollar amounts. 3) Monetary unit sampling requires specialized software due to complex calculations but this Excel spreadsheet demonstrates it can also be done in Excel, making it accessible to more auditors.

Uploaded by

Tao Li
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 16

Tao Li CPA, CA

16/01/2014

Introduction
Sampling when used in an audit is to provide a

reasonable basis for the auditor to draw conclusions about the population from which the sample is selected. The reason to use sampling is because testing of 100% of population, although would provide most assurance, sometimes it would be impossible to perform, or the cost of testing would likely exceed the expected benefit.

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Introduction
There are generally two sampling approaches: 1) statistical sampling 2)non-statistical sampling (e.g. judgemental sampling)
Both sampling approaches require the exercise of

auditor judgment during the planning, implementation and evaluation of the sampling. In some circumstances, statistical sampling is more appropriate, since it can be measured and controlled.
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Introduction
Two most commonly used statistical sampling methods: 1) Random sampling method

2) Monetary unit sampling method. Random sampling ensures that all items within a population stand an equal chance of selection. Monetary unit sample is a value-weighted sampling that each dollar in a population has an equal chance to be selected. The random sampling method would be more suitable for test of control and monetary unit sampling would be best fit for test of balances.
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Introduction
In practice, monetary unit sampling requires a lot of

calculations and need specifically designed computer software (i.e. audit software). Usually the costs associated with purchasing audit software and training would be significant. The Excel spreadsheet demonstrated here is to show implementing statistical sampling method in Excel is possible.

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Introduction
Firms without the resources to purchase

expensive audit software may consider using Excel to perform sophisticated statistical sampling methods

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The monetary unit sampling method


Is based on the monetary unit sampling method

described in CPEM (Canadian Professional Engagement Manual) 2012 edition. Please refer to chapter 17 the manual (volume II) for detail explanation of this methodology.

16/01/2014

The Population sheet should be prepared to contain all the transactions to be sampled. The Main sheet is where you will enter the other parameters, generate test sample and compute the percentage of misstatements and projected misstatement total.
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How to use this spreadsheet?


Step 1: preparing your population data on the

Population sheet. Step 2: enter performance materiality and accepted risk level, then click Generate Audit Sample button to generate a sample. Step 3: perform audit test, enter correct data and see the results.

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The Population sheet contains three columns. The third column is the amount column. If you have credit and debit amounts shown at different columns, you need to convert the credit amounts to negative values and combine them under a single column.

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The sum of the amount column (the third column) will be automatically populated in the Population Dollar Value field on the Main sheet. Note that the sum is not netted sum. It is a sum of each absolute value.

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enter performance materiality and accepted risk level in the Input area.

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simply click the Generate Audit Sample button. The test sample will be automatically generated and shown in the Sample Output area.

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Perform the audit test and enter the correct amount for each item in the test sample at the corresponding blank fields in the correct amount column.

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The misstatement and % of misstatement for each item will also be calculated automatically. After you entered the correct amounts for all testing items, look at the underneath of the list to see the total % of errors, average % of errors and projected misstatement that have been calculated by the spreadsheet automatically.
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Thank you
The excel spreadsheet can be downloaded here:

http://litaoblog.files.wordpress.com/2013/12/monetary -unit-sampling-v1-final.xlsm
If you have any questions, comments or suggestion,

please feel free to email me at tli.cpa.ca@gmail.com

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