Round numbers
an estimate...?
The test for round numbers is a very simple, yet effective, procedure for the auditor to apply to the transactions being reviewed. Often, round numbers are indicators of "estimates" which may or may not be appropriate. Common audit areas include journal entries, invoice testing, inventory counts, etc.
A round number is one which contains one or more zeros immediately to the left of the decimal point. Statistically, such numbers should be relatively uncommon, assuming they result from computed amounts which are not subject to arbitrary amounts.
The auditor can easily check for frequency and existence of round numbers in data sources such as Excel, Access, text files, and databases. A chart similar to the one below is produced automatically as a result of that process.
In the chart above, there does not appear to be an unusual quantity of round numbers.