Using the sampling tool to test journals

Using a cumulative sampling tool for journals presents some specific problems as follows:

• Journals include both debits and credits, which will cancel themselves out in a cumulative sample
• The test needs to consider the whole journal, but a sample only works on single lines

In spite of these issues, for a large dataset of journals, a cumulative sampling tool as included in Audit Assistant can still be very useful for choosing journals for substantive testing.

To get back to basics, what are we trying to achieve with the sampling of journals? We want to select a sample that covers all material items and also is statistically robust in that the sample in not biased, and can choose some non-material items as well.

To solve the problem with debits and credits, we suggest sampling on either just debits or credits, as this will effectively give us a sample to start with, and as part of our work we will also look at the other side of the journal. So although we are just sampling one part of the journal, this is our inroad into the complete journal.

The suggested process is as follows (assuming the journals are accessible from the client software - Xero for instance):

1. In the ledger software, open the Journal Report, and enter the date range.
2. In the 'columns' selection, drop out the 'credit' or 'debit' column and any other columns you may not need and apply the filter.
3. Export the journal report to Excel.
4. Open in Excel and sort by date order - this will move all the headings and totals to the bottom to be deleted (otherwise the sample tool will include headings and totals in the calculation). 
5. Save the Excel file, and import it into the sampling tool.
6. Change the name of the Sample Column from Amount to Debit (or Credit if that is what you have chosen) and enter the sample interval (e.g. Performance Materiality).
7. Select Add to create the sample.
8. The sample page will just display one line of the journal. The idea is to screenshot the complete journal and add it to the testing table as an attachment. Then complete the tests chosen.

Notes:

• Another option you may wish to use (in Xero) is to filter out journals under a specific amount, for instance if you just want to look at journals that contain amounts over materiality (and use 'import all' rather than sample).
• You might also use the filters in the report or using Excel to search for journals posted by a specific person, on specific dates (such as holidays) or to specific accounts. These can then be reviewed in more detail as higher risk items, and excluded from the general sample of lower risk journals.