Audit Sampling

Question 1

Name the different methods of selecting items for testing

Answer 1

•Select all items
•Select specific items
•Select a sample

Question 2

Name the sampling methods

Answer 2

•Statistical sampling
•Non statistical sampling

Question 3

Name the sampling methods in statistical sampling

Answer 3

•Random sampling
•Systematic sampling
•Block sampling

Question 4

Name the sampling methods in non-statistical sampling

Answer 4

•Haphazard sampling
•Block sampling

Question 5

Define audit sampling

Answer 5

•It is a technique used by auditors to achieve the goal of a cost effective audit.
•By using audit sampling, the auditor does not test of items in a class of transactions/ account balance, but only those items selected for testing

Question 6

What is anomalous error?

Answer 6

An error arising from an isolated event that is not a representative of errors in the population

Question 7

What is an error?

Answer 7

•Test of control: Deviation from a control procedure
•Test of detail substantive procedures: Rand amount of the misstatement of transactions/balances

Question 8

What is a population?

Answer 8

The entire set of data on which the auditor wishes to draw a conclusion

Question 9

What is precision?

Answer 9

•This is the maximum degree with which that conclusion, based on the sample, could deviate from the true characteristics of the population
•The smaller the precision level, the bigger the sample

Question 10

What is potential error?

Answer 10

This is the auditor’s estimate of the likely error in the population as a whole based on the procedures performed on the selected items & projected over the population

Question 11

What is sampling?

Answer 11

•This involves the application of audit procedures to less than 100% of the items within an account balance/class of transactions to enable the auditor to form an opinion on the whole population
•Audit sampling could follow either a statistical/non-statistical approach

Question 12

What is sampling risk?

Answer 12

•The risk that the auditor could reach an incorrect conclusion based on the sample as opposed to the conclusion that would have been reached if the entire population had been tested
•2 types: Risk of under reliance
Risk of over reliance

Question 13

What is sampling unit?

Answer 13

The individual items selected from the population on which the audit procedures are performed

Question 14

What is statistical sampling?

Answer 14

Has the following characteristics: random selection
: The use of probability theory to evaluate the sample results & risk

Question 15

What is stratification?

Answer 15

The dividing of the population into sub-populations with similar characteristics

Question 16

What is tolerable error?

Answer 16

•The maximum error in a population that the auditor will be prepared to accept, whilst still reaching the conclusion that the result from the sample has achieved the audit objective
•This will be a % for test of controls & a”R” amount for substantive procedures

Question 17

What is tolerable misstatement?

Answer 17

A monetary amount set by the auditor in respect of which the auditor seeks to obtain an appropriate level of assurance that the monetary amount set by the auditor is not exceeded by the actual misstatement in the population

Question 18

What is tolerable rate of deviation?

Answer 18

A rate of deviation from prescribed internal control procedures/Rand amount of a transaction/balance, set by the auditor in respect of which the auditor seeks to obtain an appropriate level of assurance that the rate of deviation set by the auditor is not exceeded by the actual rate of deviation

Question 19

What are the factors to consider during the design of a sample?

Answer 19

•The objective of the rest, namely test of controls/substantive test
•The characteristics of the population
•The definition of an error in the specific circumstances
•The definition of the population & considering whether the sample is: appropriate & complete
•The use of stratification
•The aggregate value of items in the population, applicable in particular to overstatement tests
•The sample size

Question 20

What are the factors influencing sampling size?

Answer 20

•Test of controls & substantive procedures
1. ⬇️ Tolerable error
2. Larger number of items
5. ⬆️ Expected error
•Substantive procedures

Question 21

What are the steps in the process of sampling applications?

Answer 21

•Define the population
•Define the purpose of the test
•Establish: The number of items to be tested
: What will constitute an error
: The procedures to perform on the selected items
•Select the items of the sample from the population
•Perform audit procedures on the selected items
•Evaluate the results of the items tested & draw a conclusion for the population based based on the result of the sample