This document discusses audit sampling techniques. It defines audit sampling as examining only a portion of items in a population to draw conclusions about the entire population. Sampling allows auditors to reduce time and costs compared to examining all items. The document outlines non-statistical and statistical sampling methods. Non-statistical methods include judgmental, haphazard, and block sampling while statistical sampling uses probabilities to objectively measure sampling risk. The steps of audit sampling include determining objectives, procedures, sample size, selecting the sample, applying procedures, and evaluating results.
This document discusses audit sampling techniques. It defines audit sampling as examining only a portion of items in a population to draw conclusions about the entire population. Sampling allows auditors to reduce time and costs compared to examining all items. The document outlines non-statistical and statistical sampling methods. Non-statistical methods include judgmental, haphazard, and block sampling while statistical sampling uses probabilities to objectively measure sampling risk. The steps of audit sampling include determining objectives, procedures, sample size, selecting the sample, applying procedures, and evaluating results.
This document discusses audit sampling techniques. It defines audit sampling as examining only a portion of items in a population to draw conclusions about the entire population. Sampling allows auditors to reduce time and costs compared to examining all items. The document outlines non-statistical and statistical sampling methods. Non-statistical methods include judgmental, haphazard, and block sampling while statistical sampling uses probabilities to objectively measure sampling risk. The steps of audit sampling include determining objectives, procedures, sample size, selecting the sample, applying procedures, and evaluating results.
This document discusses audit sampling techniques. It defines audit sampling as examining only a portion of items in a population to draw conclusions about the entire population. Sampling allows auditors to reduce time and costs compared to examining all items. The document outlines non-statistical and statistical sampling methods. Non-statistical methods include judgmental, haphazard, and block sampling while statistical sampling uses probabilities to objectively measure sampling risk. The steps of audit sampling include determining objectives, procedures, sample size, selecting the sample, applying procedures, and evaluating results.
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AUDIT SAMPLING
DIAGRAM OF AN AUDIT DETAILED AUDIT SAMPLING TECHNIQUES AUDIT SAMPLING AUDIT SAMPLING DEFINITION OF AUDIT SAMPLING Nature and Purpose of Audit Sampling SAMPLING is a process whereby information is gained concerning the characteristics of population (universe or field) of items by means of an examination of only a portion of the items composing that population. It is an inferential technique. It allows an auditor to draw conclusions about transactions or account balances without sustaining the time and cost of examining all available data. Why Auditors Sample 1. The nature and materiality of the balance or class does not demand a 100% audit. 2. A decision must be made about the balance or class. 3. The time and cost to audit 100% of the population would be too great LIST OF AUDIT PROCEDURES THAT DO NOT INVOLVE SAMPLING LIST OF AUDIT PROCEDURES THAT DO NOT INVOLVE SAMPLING LIST OF AUDIT PROCEDURES THAT DO NOT INVOLVE SAMPLING GENERAL APPROACHES TO AUDIT SAMPLING GENERAL APPROACHES TO AUDIT SAMPLING UNCERTAINTY AND AUDIT SAMPLING AUDIT RISK AUDIT RISK Non-sampling Risk Non-sampling risk arises from factors that cause the auditor to reach an erroneous conclusion for any reason not related to the size of the sample. It can generally be reduced to low levels through implementation of appropriately designed quality control procedures by the CPA firm. AUDIT RISK Sampling Risk Two types of sampling risk: 1. The risk the auditor will conclude, in case of test of control, that control risk is lower than it actually is, or in case of substantive test, that a material error does not exist when in fact it does. (This affects audit effectiveness and is more likely to lead to an inappropriate audit opinion.
1. The risk the auditor will conclude in case of test of control,
that control risk is higher than it actually is, or in case of substantive test, that a material error exists when in fact it does not. (This affects audit efficiency as it would usually lead to additional work to establish that initial conclusions were incorrect. (NOTE: The mathematical complements of these risks are termed CONFIDENCE LEVELS.) TYPES OF AUDIT TESTS IN WHICH SAMPLING MAY BE USED NON-STATISTICAL SAMPLING VS. STATISTICAL SAMPLING NON-STATISTICAL SAMPLING or JUDGMENT SAMPLING procedures are designed and executed on the basis of the auditor’s sound objective and reasoning judgment. Subjective influence and probabilities reasoning are not formally derived from mathematical sampling proofs and theorems. Although sampling risk exists with statistical sampling, no method for objectively measuring it is available. However, properly designed non-statistical sampling methods can provide results as effective as those obtained from statistical sampling methods. Types of Non-Statistical Sampling HAPHAZARD SAMPLING. A haphazard sample consists of sampling units without any conscious bias that is without any special reason for including or omitting items from the sample. If used, a haphazard sample should not consist of items selected in a careless manner, and that the sample should be expected to be a representative of the population. Example, a haphazard sample of check vouchers contained in a file drawer might be selected by pulling vouchers without regard for the vouchers’ size, shape or location of the drawer. Types of Non-Statistical Sampling BLOCK SELECTION. A block sample consists of all items in a selected time period, numerical sequence, or alphabetical sequence. EXAMPLE, the auditor might examine all cash payment transactions in the first week of June or the last week of December. Due to the relatively large number of blocks needed to form a reasonable audit conclusion, block sampling cannot generally be relied upon to efficiently produce a representative sample and therefore is not acceptable for statistical or non-statistical audit sampling. Types of Non-Statistical Sampling JUDGMENTAL SAMPLING. The auditor selects large or unusual items from the population and uses some other judgmental criterion for selection. Obviously, this selection method has a conscious bias and cannot be considered a representative selection method. The fact that judgmental selection is not appropriate for audit sampling does not mean that the auditor should stop using judgment in selecting items to be examined. The point is that the items selected using judgment criteria are not necessarily representative of the population and conclusions based on these items should not be extended to the population. STATISTICAL SAMPLING STATISTICAL SAMPLING is a mathematically derived tool which provides the auditor with an objective basis for expressing conclusions about population characteristic based upon a sample of items from the population. It means any approach to sampling that has the following characteristics: 1. Random selection of a sample. 2. Use of probability theory to evaluate sample results, including measurement of sampling risk. The primary benefit of statistical methods is the quantification of sampling risk. For example, a 95% confidence level provides a sampling risk of 5%, which cannot be quantified in non-statistical sampling methods. Selecting items for testing to gather audit evidence When designing audit procedures, the auditor should determine appropriate means of selecting items for testing. The means available to the auditor are: 1. Selecting all items (100% examination) 2. Selecting specific items 3. Audit sampling ( which sampling techniques to use) Selecting All Items The auditor may decide that it will be most appropriate to examine the entire population of items that make up an account balance or class of transactions (more common in substantive testing): ◦ When the population constitutes a small number of large value items; ◦ When both inherent and control risks are high; ◦ Other means do not provide sufficient appropriate evidence, or; ◦ When the repetitive nature of a calculation or other process performed by a computer information system makes a 100% examination cost effective. Selecting Specific Items The auditor may decide to select specific items from a population based on such factors as knowledge of the client’s business, preliminary assessments of inherent and control risks, and the characteristics of the population being tested. Specific items selected may include: ◦ High value or key items (example, items that are unusual, suspicious, particularly risk-prone or that have a history of error.) ◦ All items over a certain amount ◦ Items to obtain information (example, about the client’s business, the nature if transactions, accounting, and internal control systems.) ◦ Items to test procedures (to determine whether or not a particular procedure is being performed. AUDIT SAMPLING In performing audit tests in accordance to PSA, the auditor may use either nonstatistical or statistical sampling or both. Both sampling types require the exercise of professional judgment in planning, selecting the sample, executing the sampling plan and evaluating the results. Relationship between Non-statistical and Statistical sampling Determine Objective DeterD Of Test
Determine Procedures DDe To Meet Objective
How many Items
To be examined? Non- Statistical Type of Statistical Sampling
Determine Sample Size Judgmentally Determine
From Model Explicitly Sample Size Implicitly Recognizing Recognizing Relevant Factors Relevant Factors
Statistically and Evaluate Results Judgmentally Judgmentally
Document Conclusions Determine Effect on Substantive Test TYPES OF STATISTICAL SAMPLING PLANS AUDIT SAMPLING STEPS AUDIT SAMPLING STEPS AUDIT SAMPLING STEPS AUDIT SAMPLING STEPS SAMPLING IN TESTS OF CONTROLS SAMPLING IN TESTS OF CONTROLS SAMPLING IN TESTS OF CONTROLS STATISTICAL (ATTRIBUTES) SAMPLING FOR TESTS OF CONTROLS STATISTICAL (ATTRIBUTES) SAMPLING FOR TESTS OF CONTROLS STATISTICAL (ATTRIBUTES) SAMPLING FOR TESTS OF CONTROLS STATISTICAL (ATTRIBUTES) SAMPLING FOR TESTS OF CONTROLS STATISTICAL (ATTRIBUTES) SAMPLING FOR TESTS OF CONTROLS STATISTICAL (ATTRIBUTES) SAMPLING FOR TESTS OF CONTROLS STATISTICAL (ATTRIBUTES) SAMPLING FOR TESTS OF CONTROLS STATISTICAL (ATTRIBUTES) SAMPLING FOR TESTS OF CONTROLS STATISTICAL (ATTRIBUTES) SAMPLING FOR TESTS OF CONTROLS STATISTICAL (ATTRIBUTES) SAMPLING FOR TESTS OF CONTROLS STATISTICAL (ATTRIBUTES) SAMPLING FOR TESTS OF CONTROLS STATISTICAL (ATTRIBUTES) SAMPLING FOR TESTS OF CONTROLS STATISTICAL (ATTRIBUTES) SAMPLING FOR TESTS OF CONTROLS NON-STATISTICAL SAMPLING FOR TESTS OF CONTROLS NON-STATISTICAL SAMPLING FOR TESTS OF CONTROLS SAMPLING IN SUBSTANTIVE TESTS OF DETAILS SAMPLING IN SUBSTANTIVE TESTS OF DETAILS STEPS IN VARIABLES SAMPLING STEPS IN VARIABLES SAMPLING STEPS IN VARIABLES SAMPLING STEPS IN VARIABLES SAMPLING STEPS IN VARIABLES SAMPLING STEPS IN VARIABLES SAMPLING STEPS IN VARIABLES SAMPLING STEPS IN VARIABLES SAMPLING STEPS IN VARIABLES SAMPLING STEPS IN VARIABLES SAMPLING STEPS IN VARIABLES SAMPLING STEPS IN VARIABLES SAMPLING STEPS IN VARIABLES SAMPLING STEPS IN VARIABLES SAMPLING STEPS IN VARIABLES SAMPLING CLASSICAL VARIABLES SAMPLING CLASSICAL VARIABLES SAMPLING CLASSICAL VARIABLES SAMPLING CLASSICAL VARIABLES SAMPLING CLASSICAL VARIABLES SAMPLING CLASSICAL VARIABLES SAMPLING CLASSICAL VARIABLES SAMPLING CLASSICAL VARIABLES SAMPLING CLASSICAL VARIABLES SAMPLING CLASSICAL VARIABLES SAMPLING CLASSICAL VARIABLES SAMPLING CLASSICAL VARIABLES SAMPLING CLASSICAL VARIABLES SAMPLING CLASSICAL VARIABLES SAMPLING PPS SAMPLING VS. CLASSICAL VARIABLES SAMPLING
