The Field Senior Experience AS/2

Performance SupportUsing the Proportionate

Extrapolation Workbook
We often find errors or misstatements in our audits. When we have used audit sampling in a test
of details and we find a misstatement, since it was a sample that was used, we need to determine
the probable misstatement in the total population. This is what we call projecting a
misstatement over a population.
This performance support will help you determine the extent of misstatement in a population by
detailing key concepts in misstatement projection and walking you through an example using the
Proportionate Extrapolation Workbook, a tool available in audit packs to help you determine the
extent of misstatements.
Note: An alternative working paper that can be used is the Summary Evaluation of Errors
Workbook. It is important to discuss with your audit manager on the preferred workbook to be
utilized in member firms to document the probable misstatement in the total population.
For more information on misstatements, refer to Performance SupportWhat You Should Do
with Misstatements Found.
This performance support will cover the following topics (click on a link to go to the topic):
SCENARIO
HOW ARE YOU GOING TO DETERMINE THE IMPACT OF THESE
MISSTATEMENTS ON THE ENTIRE POPULATION?
o Step 1: Enter Sample Parameters
o Step 2: Enter Misstatements Detected and Entity Adjustments
o Step 3: Review the Results
o Step 4: Document Your Work

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The Field Senior Experience AS/2

SCENARIO
As you audit accounts receivable for a risk of material misstatement relating to valuation
(Materiality of 300,000 and Performance materiality of 190,000) at Georges Catering Company,
the entity where you have been spending most of your time these days, you come across the
following differences in your testing. The balance per George is what his general ledger tells
you he is owed and the balance per customer is what the confirmations that you sent Georges
customers say they owe. You have already asked George why these differences exist.
Unfortunately, George has no idea. After verifying as much as you can through invoices and
documentation of services rendered, you learn the customers are correct. George is not willing to
correct any of these differences by recording them to the general ledger.
Item #

Balance per
George

Balance per
Customer

Difference

Overstated
(O)/Understate
d (U)

200,000

180,000

20,000

35,000

37,000

(2,000)

1,839,000

1,765,000

74,000

65,930

57,740

8,190

Total Factual Misstatement

100,190
(Overstatement)

Since you used audit sampling, you need to project the total misstatements (e.g., the total factual
misstatement of 100,190) found in your audit sample to the entire population. The results of
your examination of the sample items need to be evaluated in order to form a conclusion about
the population as a whole and the risk of material misstatements. This projection is performed
regardless of whether the audit sample was statistically based or not.
HOW ARE YOU GOING TO DETERMINE THE IMPACT OF THESE MISSTATEMENTS
ON THE ENTIRE POPULATION?
To obtain the Proportionate Extrapolation Workbook in AS/2, from Document Manager Button
(or File) click New Document in your AS/2 audit file and select Proportionate Extrapolation
Workbook.

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The Field Senior Experience AS/2

This is a tool you may use when you identify factual misstatements in an audit sample when
testing for overstatement. This workbook helps you determines the amount of projected
misstatement in the population you are testing.
The Proportionate Extrapolation Workbook is laid out so that everything you need is visible and
can be easily traced from one part to another. It is organized into three major sections:
1) Sample Parameters (items to input)
2) Results
3) Misstatements Detected

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The Field Senior Experience AS/2

Below you will find the general instructions on completing the Proportionate Extrapolation
Workbook. However, you may need further information depending on the results of your
evaluation. Additional guidance is provided in the first tab, help; refer to this at any time.
Step 1: Enter Sample Parameters
Begin by entering the information about the sample you tested in the first section, as shown in
Figure 1. You are only required to populate the white cells in the document.
Figure 1:

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The Field Senior Experience AS/2

2000-2012 Deloitte Global Services LimitedPartners in Learning

The Field Senior Experience AS/2

Step 2: Enter Misstatements Detected and Entity Adjustments

The next step is to go to the Misstatements Detected section and follow the instructions as
shown below. Figure 2 depicts the populated Misstatements Detected. Again, you will only
complete the white fields, and the shaded fields are calculated based on the misstatement
recorded.
Enter a working paper reference, tickmark, or item ID to indicate where the misstatement
is found in our working papers. This will assist the reviewer (i.e., audit manager) in
knowing where the misstatement is coming from when reviewing your work.
Then enter the recorded value and audited value as positive amounts for the misstatement
identified.
If management has adjusted a misstatement, enter the adjustment in the last column,
Entity Corrections.
Figure 2:

Step 3: Review the Results

Now that you have entered all the misstatements you found in your audit sample, you can see
what these mean to the population as a whole in the Results section of the worksheet.

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The Field Senior Experience AS/2

Figure 3:

Once you have evaluated the results and completed further work, where projected misstatements
exceeds the gap between materiality and performance materiality, then transfer the misstatements
identified to working paper 2340, the Evaluation of Misstatements and Disclosures.
Step 4: Document your work
Your next step is to document in your working papers and advise your field senior of material
misstatements you identified. Ensure you have performed the following steps:
Save the Proportionate Extrapolation Workbook in the AS/2 audit file and sign-off on it
once completed and ready for review. This is documentation of your calculations.
Give the workbook an appropriate index reference and name (e.g. 5350 Proportionate
Extrapolation WorkbookAccounts Receivable Confirmations).
Document proposed entries in the working papers where you did your audit testing to
address the risk identified.
For general guidance on audit documentation, refer to the DTTL Audit Approach Manual Topic
P020 Prepare and Control Audit Documentation.

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