Explanations, Instructions, and Help on Using this Spreadsheet

Program Development:

This spreadsheet program was developed by Bruce Wampler (acwampler@ulm.edu) and Michelle McEacharn (acmceacharn@ulm.edu), Associate Professors of Accounting at The University of Louisiana at Monroe. This spreadsheet program generates a sample size using the AICPA upper-limit method based upon inputs provided by the user. The program is also capable of generating a random sample upon which tests of controls may be performed. Refer to "Customized Tables for Tests of Controls: A Spreadsheet" in the February 2001 issue (Pg 48 - 50) of The CPA Journal for more information on performing tests of controls and using this spreadsheet.

Program Purpose:

Additional Help:

Help on Using the SampleCalc Worksheet

Required Inputs

To use the SampleCalc worksheet, the user should enter in Cell B9 an estimate of the deviation rate that is expected to exist in the population being tested (Expected Population Deviation Rate) and in Cell B10 the maximum deviation rate in the population that the user is willing to accept (Tolerable Rate). In using sampling to test controls, as with any other sampling application, there is a risk that the sample results will indicate the controls to be effective when in reality they are not effective. This is referred to as the Risk of Assessing Control Risk Too Low (RACRTL). The user should enter in Cell B11 the maximum amount of risk that can be accepted. Refer to the article cited under "Additional Help" for more explanation regarding these inputs. Once the required inputs have been entered, click the "Calculate Sample Size" button. A macro is then invoked that will calculate the required sample size based on the values of the three inputs. The Required Sample Size is the minimum sample size to be used to ensure that the RACRTL is no greater than the pre-defined maximum acceptable risk. A Critical Value is also generated which represents the maximum number of deviations that may be found in the sample and still conclude that the controls can be considered effective at the acceptable RACRTL. Under Evaluation of Results, the worksheet presents the Upper Limit for all actual deviations that may be found in the population up to and including two more than the Critical Value. The Upper Limit is the maximum population deviation rate associated with the defined RACRTL. For example, if the RACRTL is 5% and the upper limit value is 6.2% for two deviations, it can be stated that if two deviations are found in the sample, there is only a 5% chance that the true population deviation rate exceeds 6.2%. In other words, the user can be 95% confident (100% - 5% RACRTL) that the true deviation rate does not exceed 6.2%. Consequently, this information can be used in deciding how much reliance can be placed on the control. The print range for the SampleCalc worksheet has been set so that the user can use normal Excel print commands and print a form with the Required Sample Size, Critical Value, and Evaluation of Results information in a format suitable for inclusion in the auditor's working papers. Input values are restricted to values between 0% and 25%. The maximum sample size that can be generated by the spreadsheet is 300 since larger sample sizes most likely will not be cost effective. The maximum number of deviations that may be displayed by the worksheet is 20.

Sample Size and Critical Value

Evaluation of Results

Printing Worksheet

Restrictions and Limitations

Help on Using the "Generate Random Sample" button and the SamplePrint Worksheet Once the Required Sample Size has been determined, click on the "Generate Random Sample" button to generate a random set of specific sample items in a printable worksheet "Generate Sample" Button format.

Extra Items Input

Once the "Generate Random Sample" button is clicked, the user will be asked three questions. The first question allows the user to request extra sample items. Extra sample items are sometimes needed because an item selected for sampling as part of the original sample size is not relevant to the test of the control. Additionally, this spreadsheet, as well as the binomial distribution and AICPA tables upon which it is based, assumes that the sample is drawn with replacement, meaning a specific sample item can be drawn more than once. Some auditors may prefer to sample without replacement, which would provide more conservative results, in which case extra sample items may be requested to substitute for those items that are selected more than once in the initial sample selection process. Up to 30 extra sample items may be requested. The extra items are presented separately from the original sample items and are denoted by the word "Extra". Extra sample items should be used in the order in which they are drawn, and, consequently, are not sorted.

Lowest/Highest Values Input

The next two questions ask the user to input the lowest value from which the sample is to be drawn and the highest value. These values are drawn from the population being tested and may include items such as invoice numbers, purchase order numbers, account numbers, etc. For example, if the auditor wants to pull a sample from a population of receiving reports numbered 10000 through 12000, then 10000 and 12000 would be entered as the lowest and highest values, respectively. Sample items numbered within this range (inclusive) would be generated and sorted. The user may enter 1 as the lowest value and the population size as the highest if the user wants numbers generated that would permit the selection of sample items by counting in order (e.g., if "44" is generated as a sample item, the 44th item in the population of items would be selected). The low value must be greater than zero, the high value must be greater than the low value, and both values can be no longer than ten digits in length. The spreadsheet will then generate and sort the randomly selected sample. Extra sample items will also be generated. The sample items are displayed in a printable format. The printable worksheet headings are set through the use of the "Header" formatting capability of Excel and may be changed at the discretion of the user. The printable worksheet is set through the use of the macro that generates the random sample items and modification requires the user to have a thorough understanding of macros and Visual Basic for Applications. The user may use normal print commands to print the worksheet containing the selected sample items. The user may start over, calculate a new sample size for another test of controls, generate a different set of random sample items, change the desired number of extra sample items, or modify the lowest and highest sample values by clicking on the SampleCalc tab to return to the calculation worksheet and changing the input values for either the sample size determination or the sample generation function. The SamplePrint worksheet is only modified by clicking on the "Generate Random Sample" button on the SampleCalc worksheet.

Printing the worksheet

Starting Over

Worksheet for Test of Controls Sample Size Determination Expected Population Deviation Rate Tolerable Rate Risk of Assessing Control Risk Too Low (RACRTL) Required Sample Size Critical Value (maximum allowable deviations) Evaluation of Results Actual Number of Deviations 0 1 2 3 INPUTS 2.00% 10.00% 10.00% 38 1

RACRTL 1.82% 9.53% 25.37% 46.48%

Upper Limit 5.9% 9.9% 13.5% 16.8%

Client ___________________ Test of __________________

SAMPLING WORKSHEET

Completed by ____________ Date ____________

Number Sample Item Deviation? Note Number 1 10045 2 10161 3 10196 4 10321 5 10325 6 10372 7 10415 8 10522 9 10556 10 10579 11 10602 12 10652 13 10758 14 10764 15 10803 16 10820 17 10825 18 10857 19 10860 20 10916 21 11087 22 11122 23 11167 24 11255 25 11264 26 11266 27 11293 28 11356 29 11389 30 11426 31 11571 32 11670 33 11812 34 11828 35 11833 36 11839 37 11898 38 11960

Number Sample Item Deviation? Note Number Extra 11005 Extra 11027 Extra 10926 Extra 10707 Extra 10810 Extra 10539 Extra 10111 Extra 10487 Extra 11959 Extra 10121