a Group Materiality 100,000 k Achieved Group 95-th Percentile 100,272

b Desired Group Assurance 95% l Achieved Group Assurance (AGA) 94.94%

m Relative Total Variable Cost (RTVC) 1.76

Group
Variable Auditor's Constrained
Component Name Component Size Cost per Component Component Materiality
Unit Prior Materiality
Assurance

c d e f g h i j
Total 15,000,000 1.00 35,000
160,712 1.00
1 Component 1 9,000,000 0.60 Moderate 95,954 0.60
2 Component 2 5,000,000 0.33 High 35,000 35,000 0.22
3 Component 3 1,000,000 0.07 0.60 29,757 0.19
4 - - -
5 - - -
6 - - -
7 - - -
8 - - -
9 - - -
10 - - -
11 - - -
12 - - - Size
Relative Component Size and Materiality in Descending Order of Size
13 - - - Materiality
14 - .7 - -
.6
15 - .5 - -
16 - .4 - -
17 - .3 - -
18 - .2 - -
.1
19 - .0 - -
20 - - -
Component 1
Component 2
Component 3

Component Materiality Calculator: GUAMcalc

HELP: A brief explanation of each labeled field in GUAMcalc
GENERAL WARNING: Do not use "drag-and-drop" as it will mess up the worksheet and result in #REF! errors. Copy/Paste can have
Should a problem occur, please use the Excel Undo function immediately.
a Enter Group Materiality as a whole number. If the field is blank, Component Materiality is displayed as a percentage of Group Materia
b Desired Group Assurance. This can be changed in the Policy Settings tab.
c Enter Component Name.
d Enter Component Size as a whole number. Only relative size matters, so the amounts need not be in the same units as Group Material
e Relative Component Size = Component Size / Sum of Component Sizes.
f Enter the relative Variable Cost per Unit (e.g., relative hourly rate). Blank means VCU = 1.
g* Describe the Group Auditor's Prior Component Assurance, selecting from the drop-down list.* Blank = "Negligible". Choices can be mo
h Enter amount, if any, to which Component Materiality is Constrained (e.g., for statutory audit purposes). Enter it as a whole number in
(if the Constrained value exceeds Component Materiality required for group audit purposes the tick mark ">" is displayed and the con
i Component Materiality (rounded).
j Relative Component Materiality = Component Materiality / Sum of Component Materialities.
k Achieved Group Percentile, to be compared with Group Materiality [a].
l Achieved Group Assurance (AGA), to be compared with Desired Group Assurance [b].
m Relative Total Variable Cost (RTVC) = Ratio of Total Variable Cost using indicated Component Materiality levels and using Group Mater
Chart: This depicts Relative Component Size and Relative Component Materiality in descending order of Component Size.

* PRIOR ASSURANCE, POLICY SETTINGS

Description Probability

Negligible 0%
Very Low 10%
Low 30%
Moderate 50%
High 70%
Very High 90%

SOFTWARE DOCUMENTATION: See "About" tab.

Component Materiality Calculator: GUAMcalc

EF! errors. Copy/Paste can have a similar effect if not used carefully.

as a percentage of Group Materiality.

the same units as Group Materiality.

= "Negligible". Choices can be modified in the Policy Settings tab.

es). Enter it as a whole number in the same units as Group Materiality
mark ">" is displayed and the constraint is ignored).

lity levels and using Group Materiality throughout.

of Component Size.

Data Entry Field

Computed Field
Desired Group Assurance 95% R-Factor 3.00
"Factory" Setting 95% 3.00

PRIOR ASSURANCE TABLE

Relative to Final Component Relative to Initial Component

Materiality Materiality

Description Probability R Probability R Component Materiality

Increase

Negligible 0% 0.0 0.0% 0.0 0.0%

Very Low 10% 0.1 9.7% 0.1 3.5%
Low 30% 0.4 27.3% 0.3 11.9%
Moderate 50% 0.7 43.0% 0.6 23.1%
High 70% 1.2 57.6% 0.9 40.2%
Very High 90% 2.3 72.8% 1.3 76.9%

"Factory" Settings*
Negligible 0% 0.0 0.0% 0.0 0.0%
Very Low 10% 0.1 9.7% 0.1 3.5%
Low 30% 0.4 27.3% 0.3 11.9%
Moderate 50% 0.7 43.0% 0.6 23.1%
High 70% 1.2 57.6% 0.9 40.2%
Very High 90% 2.3 72.8% 1.3 76.9%
* Probability Percentages Based on SAS 39, Table 2
Component Materiality Calculator: GUAMcalc
 Component Materiality Calculator: GUAMcalc
© 2012-2013 Trevor R. Stewart and William R. Kinney, Jr.
Version 1.0.1

License

Permission to use, copy, modify, and/or distribute this software for any purpose with or without fee is hereby
granted, provided that the above copyright notice and this permission notice appear in all copies.

THE SOFTWARE IS PROVIDED "AS IS" AND THE AUTHORS DISCLAIM ALL WARRANTIES
WITH REGARD TO THIS SOFTWARE INCLUDING ALL IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS. IN NO EVENT SHALL THE AUTHORS BE LIABLE FOR
ANY SPECIAL, DIRECT, INDIRECT, OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES WHATSOEVER
RESULTING FROM LOSS OF USE, DATA OR PROFITS, WHETHER IN AN ACTION OF CONTRACT, NEGLIGENCE OR
OTHER TORTIOUS ACTION, ARISING OUT OF OR IN CONNECTION WITH THE USE OR PERFORMANCE OF THIS
SOFTWARE.
[Internet Sytems Consortium (ISC) License]

About GUAMcalc

This software implements the GUAM method for determining Component Materiality in accordance with ISA
600 and other auditing standards as set forth in "Group Audits, Group-Level Controls, and Component
Materiality: How Much Auditing is Enough?" by Trevor R. Stewart and William R. Kinney, Jr., The Accounting
Review, March 2013. Available at:

http://dx.doi.org/10.2308/accr-50314

Help
A basic level of help for users who are generally familiar with the GUAM method is provided in the Help tab.

Documentation
Full documentation of the software including details of the algorithm is contained in Chapter 8 of Trevor
Stewart's doctoral dissertation, A Bayesian Audit Assurance Model with Application to the Component
Materiality Problem in Group Audits. Available at:
http://dare.ubvu.vu.nl/handle/1871/39813

Protection
The workbook is lightly protected to reduce the possibility of inadvertent errors and the main algorithms are
performed in hidden columns. There are no passwords or hidden worksheets.

Certain audit parameters that are generally a matter of firm policy are set in the Policy Settings tab. In
practice, firms using this workbook or a derivative thereof should consider hiding and password-protecting
the Policy Settings tab before distributing the workbook to the field.

New Versions
The latest version of this workbook and related materials are hosted on Rutgers Accounting Web at:
http://raw.rutgers.edu/GUAMcalc

Feedback
The authors encourage comments and suggestions for improvement. Please feel free to contact us:
Trevor Stewart
trsny@verizon.net
Bill Kinney
William.Kinney@mccombs.utexas.edu