AUDIT SAMPLING

Question 1

HOW MANY WAYS OF SELECTING ITEMS FOR TESTING ?

Answer 1

Following are the different means of selecting items for testing.
01.100% ITEMS SELECTION
02.SPECIFIC ITEMS SELECTION
03.AUDIT SAMPLING

Question 2

100% ITEMS SELECTION

Answer 2

-Usually Auditor do not check 100% transaction, however,it is appropriate to test entire population in following cases.
01.POPULATION CONSISTS OF SMALL NUMBER OF LARGE BALANCES(FIXED ASSETS TRANSACTION).
02.THERE IS SIGNIFICANT RISK WHICH CANNOT BE REDUCED BY OTHER MEANS.(LEGAL CASES).
03.100% EXAMINATION BECOMES COST EFFECTIVE DUE TO REPITIVE NATURE OF CALCULATION OR PROCESS PERFORMED AUTOMATICALLY BY AN INFORMATION SYSTEM.OR
04. POPULATION IS NOT HOMOGENUOUS i.e ITEMS IN A POPULATION DO NOT SHARE SAME CHARACTERISTICS.

Question 3

SPECIFIC ITEMS SELECTION:

Answer 3

Following items may be relevant for auditor while specific items for examination.
01.ALL ITEMS OVER A CERTAIN AMOUNT (to verify large portion of total amount).
02.KEY ITEMS SHOWING CERTAIN CHARACTERISTICS ( itmes with high risk i.e Suspicious, items having history of errors,risk prone,)
03.ITEMS TO OBTAIN INFORMATION (nature of entity ,nature of transaction).

Question 4

AUDIT SAMPLING

Answer 4

AUDIT SAMPLING IS THE APPLICATION OF AUDIT PROCEDURES TO LESS THAN 100% ITEMS WITHIN POPULATION SELECTED IN SUCH A WAY ALL SAMPLING UNITS HAVE EQUAL CHANCE OF SELECTION,
OBJECTIVE OF SAMPLING IS TO PROVIDE BESIS FOR CONCLUSION ABOUT ENTIRE POPULATION.
AUDITOR USES SAMPLING IN TEST OF CONTROLS AND TEST OF DETAILS.