Let's follow the process the Just4This Example team would follow for this engagement. You may find it beneficial to open both files and follow them while continuing with the article. Note that you can download the initial file received from the client and the final file after the audit team went through journal-entry testing procedures. Specifically, the audit team was able to obtain trial balances as of and, as well as the listing of all journal entries for year 2019 in the Microsoft Excel format. The Just4this Example Accounting engagement team brainstormed possible approaches to journal-entry testing and judged the client's accounting system capable of generating appropriate data for the use of CAATs. In the past two years, however, the client's industry has seen an economic decline along with revenue and profit deterioration. The owners of NotReal Manufacturing are contemplating the sale of the company in the next few years hence, steady revenue increases are important to them. is undergoing a financial statement audit for 2019. One of the firm's clients, NotReal Manufacturing Co. The firm's 10 professionals are not trained in using a specialized audit software to apply CAATs, but the team has access to Microsoft Office and uses Excel extensively.
Imagine an accounting practice called Just4this Example Accounting that provides tax and audit services to small and midsize businesses. With those caveats in mind, let's jump into an example.
In general, auditors must consider multiple factors (e.g., control environment, availability of client's data enabling the use of CAATs) in performing journal-entry testing during audit engagements. The procedures described in this article outline just one of many ways journal-entry testing can be completed. Excel can perform any number of computer-assisted auditing techniques (CAATs) for no additional cost beyond the Office licensing or subscription fee.īefore proceeding, it's important to note that auditors' work involves judgment. What auditors and other CPAs might not know is how to use Microsoft Excel to test journal entries.įor the many CPAs who use Excel through a Microsoft Office license, the spreadsheet application may prove an appealing choice for use in journal-entry testing. Auditors know that journal- entry testing is one of many procedures they can use in addressing client data completeness and, hence, audit risk (see AU- C Section 240, Consideration of Fraud in a Financial Statement Audit).
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