AN APPROACH FOR CALCULATING PROBABILITIES FOR TESTS OF CONTROLS USINGAN ELECTRONIC SPREADSHEET

When conducting tests of controls, auditors often resort to tables or simplified calculations to arrive at assurance levels. The calculation s typically result in auditors taking a conservative position compared to an exact calculation of the assurance level achieved. Even though commercially available spreadsheets are powerful, they are difficult t o program to calculate exact levels of probability. This note presents the underlying statistical formulae for the hypergeometric distributi on which is appropriate for sampling without replacement for tests of controls. It develops this theoretical framework into straightforward instructions useful in many spreadsheet programs. The result can be ex pected to increase the precision underlying auditors' judgments withou t incurring the expense of sophisticated software.