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Analytical Aspects of Audit

Analytical Aspects of Audit. Stephen Allen, ACBA. Aspects Covered. Sample selection from paper lists or multiple sources Simulating applications in MS Excel Presentational power of the ‘If…’ function in MS Excel. Sample Selection. Methods - advantages & disadvantages

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Analytical Aspects of Audit

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  1. Analytical Aspects of Audit Stephen Allen, ACBA

  2. Aspects Covered • Sample selection from paper lists or multiple sources • Simulating applications in MS Excel • Presentational power of the ‘If…’ function in MS Excel

  3. Sample Selection • Methods - advantages & disadvantages • ACBA function for random selection • preparation for and use of the function • presentation of results and audit trail • Access to ACBA Random Sampling

  4. Selection Methods

  5. Preparation - complete the form

  6. Preparation Explained • Size of sample & test name • decide how many transactions you want to select • how do you want to identify this test? • For each source • give it a unique name - one that you can recognise • how many pages are there? • count how many transactions there are • on the first page • on the inner pages • on the last page • Click ‘Enter Details’ • you will be asked whether you want to include another source

  7. Select the sample • Click ‘Yes’ to the above message box • unless you have variable numbers of transactions on the inner pages of your list

  8. The Results • You will be presented with • a list of selected transactions • in ascending order - for ease of locating them • without duplicates • showing • the random number which determines the page selected • the page number within the source • the name of the source • the nth transaction selected within that page

  9. It will look like

  10. ACBA Random Sampling function - availability • Available from ACBA web site • no charge for single copies • anonymous download • web site address http://www.acba.co.uk

  11. Simulating Applications • Deciding what to simulate • Design on a spreadsheet • Gathering input • input controls • Processing • creating formulae • The Results • what do they really mean? • Summarising the results

  12. What to Simulate • Standard system • input & associated control • processing & associated control • output • Primary interest is in ‘processing’ • all other elements including the system’s controls can usually be discarded • otherwise you are, in effect, rebuilding the system

  13. Design on a spreadsheet • Separate permanent data from transaction data • Use columns and rows as if you were writing a working paper • left to right then downwards • Use different colours or other presentational devices to show the data entered and the associated results • Hide columns or rows of formulae in preference to using spreadsheet protection • protection hinders access to useful functionality • If possible, keep to a single screen without scrolling

  14. Design on a spreadsheet - in practice Green - to enter data, Red - for result Permanent data separate Rows 14 - 18 hidden for protection Spreadsheet - impractical to fit on one screen without scrolling

  15. Data input • You will need • all the transactional and permanent data necessary to carry out the calculation, and • the results from the original system, so that you can make a comparison • Do not allow comparative results to show unless all the necessary data is there

  16. Data input - practice 1 • Wherever practicable explain the type of input required • Validate the type of input if there is serious risk of error

  17. Data Input - practice 2 • monitor entries as they are made • make sure you gather all the data you need • Cell ‘J6’ states - if Cell ‘I6’ is a number enter fig 1 otherwise leave blank • Cell ‘J9’ states - if all the required entries contain valid data enter fig 3 otherwise leave blank

  18. Processing • Mimicking the system’s calculations • break the calculations into easy to understand chunks • ensure you process them in the correct and logical order • compare results to system’s output • Note, when handling cumulative calculations, the first formula is always different to all subsequent ones

  19. Data input and processing- practice 3

  20. The Results • Literally, that the two approaches do or do not agree • always more likely that the simulation has an error if agreement not achieved • validate simulation independently before assuming system error. • Correction of errors in simulation generates a much improved understanding of the main system

  21. Summarising the Results • Automated summaries should be adopted only where the simulated system has been independently validated • Often a good idea to provide for auditor interpretation of results first, even with validated systems

  22. The ‘IF’ Statement • The classic method of branching in computing • Structure • set evaluation criteria • action if criteria are met • action if criteria are not met • Syntax in MS Excel • ‘=IF(Criteria, True, False)’

  23. ‘IF’ - a worked example • =IF(D6 <> “”, D6, “”) • this translates as, IF • the cell at D6 is not blank <> “” • places the contents of D6 in this cell • otherwise leave this cell blank • very useful for avoiding situations where you do not want a calculation to take place before the appropriate data has been put in

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