Quantitative evaluation of exceptions
The purpose of the quantitative evaluation of exceptions is to
estimate the number or value of the three types of exceptions in
the total population (or stratum). The three categories of
exceptions identified as part of the
qualitative analysis - atypical,
systematic and random - are considered as follows.
Atypical exceptions. The number or value of atypical
exceptions are simply totalled.
Systematic exceptions. The effect of each systematic
exception on the total population is estimated based on the
auditor's qualitative evaluation of how, why, when and where the
systematic exception occurred.
Random exceptions. The number or value of random
exceptions is projected using one of the techniques below.
- In control testing, the number of random exceptions in
the sample [e] is divided by the number of items in the sample [n].
If the sample occurrence rate [e/n] is applied to the total number
of items in the population (or stratum) [N], the result [Ne/n] will
provide an estimate of the number of random exceptions in the
population (or stratum).
- In substantive testing, a common method of projecting
random exceptions is to calculate the average value of the random
exceptions in the sample by dividing the value of all random
exceptions in the sample [$e] by the number of items in the sample
[n]. The average value of the random exceptions in the sample
[$e/n] is then multiplied by the total number of items in the
population (or stratum) [N] to provide an estimate of the value of
random exceptions in the population (or stratum). (Another method
is to calculate the percentage of the value of random exceptions
found in the sample [$e] to the total value of the sample [$n] and
then apply this percentage to the total value of the population (or
stratum). However, this method is usually avoided as an underlying
assumption of this method is that the average value of the items
selected in the sample is approximately equal to the average value
of the items not selected.)
Total estimated exceptions. In control testing,
the total number of atypical, systematic and random exceptions is
divided by the total number of items in the population (or stratum)
to determine the estimated actual level of exceptions (i.e.
deviation rate), expressed as a percentage, in the population
(stratum). In substantive testing, the total value of the
atypical, systematic and random exceptions, is equal to the
estimated actual level of exceptions (i.e. misstatements) in the
population (stratum).
Audit testing procedures, index
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