Ch. 16 Sampling

Question 1

Where can we find the guidance for audit evidence?

Answer 1

Cas 500.A63

Question 2

What are the 3 ways a practitioner can select items for testing?

Answer 2

• all
• specific items
• audit sampling

Question 3

when would selecting all items be appropriate?

Answer 3

• population has a small number of large value items
• there is sigifnicant risk and other means do not provide enough evidence
• reptitive nature of a calculation or other process makes a 100% examinatino cost effective

Question 4

When would you select specific items?

Answer 4

when we have a good understanding of the entity, assessed the risk, and the understand the characteristics of the population being selected.

We might select:
- high value of key items (sus, unusual, risk-prone or things with a history of error)

• items over a certain amount
• items to obtain information

This does not substitute audit sampling, and cannot be projected onto the entire population.

Question 5

When would you use audit sampling

Answer 5

it is an application where less than 100% of the populatino is sampled but the findings are projected to the entire population.

Pros:
- save time and resources
- less expensive than testing 100%
- only requried to obtain reasonable assurance not absolute

Question 6

What are some considerations that must be included in the decision of audit procedures?

Answer 6

TOC = Deviation (when controls are not performing)

TOD = misstatement

• is the sample representative of the population
• is the popualtion complete (completeness test)
• what is the expected deviation/misstatement

must ensure that the population being tested is homogenous/representative and complete

Question 7

What is stratification

Answer 7

Dividing up a larger population into smaller data sets.

It is to perform more efficient and effective testing
this can be done with:
- monetary value
- characteristics
- representative items

Question 8

What are some sampling approaches?

Answer 8

Statistical sampling - random selection of sample items (using probaility theory)

Non-stat - judgement is used via professional judgement

Question 9

What are the pros and cons of using stat sampling?

Answer 9

pros:
- results are objective and densible
- uses advance estimatino of a sample size, being able to estimate the extent of testin gbetter
- allows an estimate to made on sampling risk and error of the entire popuatlion, and not just the tested items
- provides an estimate of th sampling confidence achieved
- can be combined

Cons:
- there’s more work done in prepatory work and make it more expensive, time consuming
- audit staff require additional training to administer and interpret the sample requests.

Question 10

What are the pros and cons of non-stat

Answer 10

pro:
- less time and less cost

cons:
- cannot make stat influences and cannot calculate smapling risk
- it is open to more scrtiny