Preparing a classical variables sample

Before sampling a set of data, you must stratify the table containing the records, and calculate a statistically valid sample size for each stratum.

The CVS Prepare feature in Analytics calculates the required values for you based on input values you provide.

The importance of calculating a sample size

Calculating an appropriate sample size is critical to the validity of the subsequent sample. If the sample is not valid, or representative, you cannot reliably project the results of audit procedures you perform on the sample to the entire population.

Do not skip calculating a sample size, or guess at a sample size.

Most of the input values you use to calculate sample size are based on your professional judgment. Ensure that you fully understand the implications of the values before relying on the results of sampling in a production environment. Consult audit sampling resources, or an audit sampling specialist, if you are in doubt.

Numeric length limitation

Several internal calculations occur during the preparation stage of classical variables sampling. These calculations support numbers with a maximum length of 17 digits. If the result of any calculation exceeds 17 digits, the result is not included in the output, and you cannot continue with the sampling process.

Note that source data numbers of less than 17 digits can produce internal calculation results that exceed 17 digits.

How precision limits work

When you prepare a classical variables sample you must choose one of the options listed below for Precision Limits.

The option you choose dictates the type of estimation range you generate during the CVS Evaluate stage of the sampling process.

You need to choose an option now, during the preparation stage, because the option you choose is one of the requirements for calculating the sample size.

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The "sided-ness" of the range

The "sided-ness" of the range is derived from the normal distribution, or bell curve, that forms the basis of classical variables sampling.

A two-sided range

If you are examining an account that as a whole could be either overstated or understated then typically you are interested in whether misstatement in either direction exceeds the amount of misstatement that you judge is tolerable or acceptable.

You need a two-sided range or estimate:

• The lower limit is an estimate of the maximum amount of overstatement that could exist in the account for the confidence level you specify
• The upper limit is an estimate of the maximum amount of understatement that could exist in the account for the confidence level you specify

A one-sided range

If you are examining an account that as a whole is likely to be overstated, or likely to be understated, you may only be interested in whether misstatement in one direction exceeds the amount of misstatement that you judge is tolerable or acceptable.

You can use a one-sided range or estimate:

• A range with only a lower limit is an estimate of the maximum amount of overstatement that could exist in the account for the confidence level you specify
• A range with only an upper limit is an estimate of the maximum amount of understatement that could exist in the account for the confidence level you specify

Should I use a two-sided or one-sided range?

During the CVS Evaluate stage, using a two-sided range is the more prudent choice. A two-sided range allows you to judge whether an account is fairly stated regardless of the overall direction of misstatement in the account.

The benefit of using a one-sided range is that you can reduce the required sample size, which reduces the required labor and cost of analyzing the sample data. The amount of reduction varies, but typically is less than 50%.

The risk of using a one-sided range is that if you are wrong about the overall direction of misstatement in an account, you could miss a material misstatement in the unexamined direction and make an incorrect judgment about the fairness of an account balance.

How input values affect sample size

Input values affect the sample size calculated by Analytics. You can experiment with different input values in the CVS Prepare dialog box to see how they affect the sample size.

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Caution

In a production environment, do not manipulate input values solely to achieve a smaller sample size. Input values should be based on your professional judgment about what is most appropriate for the data being sampled and the audit objective.

Increasing this input value:	Decreases sample size	Increases sample size
Number of Strata	After a certain point, increasing Number of Strata has little or no effect on sample size
Number of Cells	Increases or decreases sample size depending on the nature of the data, but generally decreases sample size After a certain point, increasing Number of Cells has little or no effect on sample size
Minimum Strata Sample Size		Increases sample size if the minimum threshold applies in one or more strata
Minimum Total Sample Size		Increases sample size if the minimum threshold applies
Top certainty stratum cutoff	Increases or decreases sample size depending on the nature of the data If values in the data are relatively evenly distributed, a higher Top certainty stratum cutoff decreases sample size
Bottom certainty stratum cutoff		Increases or decreases sample size depending on the nature of the data If values in the data are relatively evenly distributed, a higher Bottom certainty stratum cutoff increases sample size Note For negative cutoff values, "higher" means closer to zero (0).
Confidence Level (%)
Monetary Precision
Number of Expected Errors	Has no effect on sample size
Precision Limits	Both requires a larger sample size than Upper or Lower

Steps

1. Open the table containing the book values that you intend to sample.
2. Select Sampling > Classical Variables Sampling (CVS) > Prepare.

   Note

   The menu option is disabled if a table is not open.

3. On the Main tab, select the book value field from the Book Value drop-down list.
4. In the Precision Limits drop-down list, select an appropriate option: 
   • Both
   • Upper
   • Lower

   Note

   The options are explained in detail below.

5. Enter the input values to use for preparing the sample design:
   • Number of Strata
   • Number of Cells
   • Minimum Strata Sample Size
   • Minimum Total Sample Size
   • Top certainty stratum cutoff
   • Bottom certainty stratum cutoff
   • Confidence Level (%)
   • Monetary Precision
   • Number of Expected Errors

   Note

   The input values are explained in detail below.

6. Optional. If there are records in the current view that you want to exclude from processing, enter a condition in the If text box, or click If to create an IF statement using the Expression Builder.

   Caution

   If you specify a conditional expression, an identical conditional expression must be used during both the calculation of the sample size, and the drawing of the sample.

   If you use a condition at one stage and not the other, or if the two conditions are not identical, the sampling results will probably not be statistically valid.

7. On the Output tab:
   1. In the To panel, select one of the following:
      • Screen displays the results in the Analytics display area

        Tip

        You can click any linked result value in the display area to drill down to the associated record or records in the source table.

      • File saves or appends the results to a text file

        The file is saved outside Analytics.

   2. If you selected File as the output type, do one of the following:
      • Enter a file name in the Name text box.
      • Click Name and enter the file name, or select an existing file in the Save or Save File As dialog box to overwrite or append to the file.

        If Analytics prefills a file name, you can accept the prefilled name, or change it.

        You can also specify an absolute or relative file path, or navigate to a different folder, to save or append the file in a location other than the project location. For example: C:\Results\Output.txt or Results\Output.txt.

      Note

      ASCII Text File or Unicode Text file (depending on which edition of Analytics you are using) is the only option for File Type.

8. Click OK.

   The CVS preparation output results are displayed on screen, or saved to a file.

   Included in the display is a prefilled version of the CVSSAMPLE command.

   Note

   The output results are explained in detail below.

Save the CVSSAMPLE command for later use (optional)

As a convenience, you can save the CVSSAMPLE command to use once you have prepared a classical variables sample.

1. At the bottom of the CVS Prepare display area, click the CVSSAMPLE link to load the command into the command line.
2. Copy the entire command from the command line and save it in an Analytics script.

   After you have prepared the sample, you can use either the CVS Sample dialog box, or the CVSSAMPLE command, to draw the sample of records.

   Note

   If you use the CVSSAMPLE command, you need to add the name of the output table to the command, and a seed value (optional).

   For more information, see CVSSAMPLE command.

CVS Prepare dialog box inputs and results

The tables below provide detailed information about the input values in the CVS Prepare dialog box, and the output results.

Main tab – input values

Example screen from classical variables sampling tutorial

greater than (>) the maximum amount in the Book Value field

less than (<) the minimum amount in the Book Value field

Output results

Example screen from classical variables sampling tutorial