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Audit Sampling For Tests of Details of Balances
Audit Sampling For Tests of Details of Balances
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Describe variables sampling.
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Differentiate audit sampling for tests of details
of balances and for tests of controls and
substantive tests of transactions.
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Differences among tests
Type of Test What It Measures
Controls Effectiveness of
controls
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14 steps required in audit sampling for
tests of details of balances.
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Audit sampling for tests of
Audit sampling for tests controls and substantive
of details of balances tests of transactions
1. State the objectives 1. State the objectives
of the audit test. of the audit test.
2. Decide whether audit 2. Decide whether audit
sampling applies. sampling applies.
3. Define a misstatement. 3. Define attributes and
exception conditions.
4. Define the population. 4. Define the population.
5. Define the sampling unit. 5. Define the sampling unit.
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Audit sampling for tests of
Audit sampling for tests controls and substantive
of details of balances tests of transactions
6. Specify tolerable 6. Specify the tolerable
misstatement. exception rate.
7. Specify acceptable risk 7. Specify acceptable risk
of incorrect acceptance. of overreliance.
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Apply monetary unit sampling.
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MUS is an innovation in statistical
sampling methodology that was
developed specifically for use
by auditors.
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• The definition of the sampling unit
is an individual dollar.
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•Sample size is determined using a
statistical formula.
•A formal decision rule is used for
deciding the acceptability
of the population.
•Sample selection is done using
probability proportional to size
sample selection (PPS).
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The auditor generalizes from the
sample to the population using MUS
techniques.
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➢Estimate of the population exception rate
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➢MUS increases the likelihood of selecting
high-dollar items
➢Easy to apply
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Describe variables sampling.
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Frequency of values in percent
Value of x in dollars
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Three things shape the results of the
experiment of taking a large number of samples
from a known population:
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2. The shape of the frequency distribution
of the sample means is that of a normal
distribution (curve), as long as the sample
size is sufficiently large, regardless of the
distribution of the population.
3. The percentage of sample means between
any two values of the sampling
distribution is measurable.
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Mean
Frequency of values in percent
Sampling
distribution –
Normal
Population
distribution –
Skewed
Value of in dollars
x
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➢ Difference estimation
➢ Ratio estimation
➢ Mean-per-unit estimation
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➢ All of the elements of the population are
divided into two or more subpopulations
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Actual state of the population
Materially Not materially
Actual audit decision misstated misstated
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Use difference estimation in tests of details of
balances.
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➢State the objectives of the audit test
ARIR
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1. Estimate an expected point estimate
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SD*(ZA + ZR)N
n=
(TM – E *)
where:
n = initial sample size
SD* = advance estimate of the standard deviation
ZA = confidence coefficient for ARIA
ZR = confidence coefficient for ARIR
N = population size
TM = tolerable misstatement for the population
(materially)
E* = estimated point estimate of the population
misstatement
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Generalize from the sample to the population
1. Compute the point estimate of the
total misstatement
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Copyright
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