Chapter 11: Evidence and sampling

Question 1

Name procedures to obtain evidence

Answer 1

1. inspection
2. observation
3. analytical procedures
4. inquiry
5. external confirmation
6. recalculation
7. performance

Question 2

What are the 3 main types of CAAT?

Answer 2

1. test data
2. audit software
3. data analytics

Question 3

Test data supports auditors in what test?

Answer 3

Test of control

Question 4

What are the options for deciding upon test data?

Answer 4

1. dummy data -> careful to reverse all effects
2. real data -> data may not contain all the errors
3. dummy data against a verified copy of the client’s system -> safer

Question 4

What does audit software make use of?

Answer 4

Assurance providers’ own specialized software

Question 5

Name some examples of what audit software can do

Answer 5

extract a sample according to specific criteria (random, over a certain amount, at certain dates, below a certain amount); calculate ratios and select those outside set criteria; prepare reports; check calculations and casts; follow items through a system and flag where they are posted

Question 6

Audit software supports auditors in what test?

Answer 6

Substantive procedures

Question 7

What can data analytics do?

Answer 7

discover and analyze patterns, deviations and inconsistencies, extract other useful information

Question 8

Does data analytics have to create tailor-made software?

Answer 8

No

Question 9

Name some examples of what data analytics can do

Answer 9

analyse all trans in a population, match trans, assist in segregation of duties, compare entity data to externally obtained data, manipulate data to assess different assumptions, three-way matches, matches of orders to cash and purchases to payments

Question 10

Are analytical procedures compulsory in the performing stage?

Answer 10

No. Only compulsory in the planning stage and overall review stage

Question 11

What are some factors that the auditors should consider when using analytical procedures as a substantive procedure?

Answer 11

1. objectivity
2. suitability
3. reliability

Question 12

If is overstated (existence), which directional test should auditors use?

Answer 12

Book to fact

Question 13

If is understated (completeness), which directional test should auditors use?

Answer 13

Fact to book

Question 14

Name some methods to audit accounting estimates

Answer 14

1. use a point estimate
2. review events occurring up to the date of the auditor’s report
3. test the process that mgt used to estimate the figure
4. test the operating effectiveness of controls over how mgt made the accounting estimate

Question 15

What are the main objectives of the auditors using audit sampling?

Answer 15

To provide a reasonable basis for the auditor to draw conclusion about the population from which the sample is selected

Question 16

What is audit sampling?

Answer 16

The application of audit procedures to less than 100% of items within a population of audit relevance

Question 17

Name 2 approaches to sampling and their characteristics

Answer 17

1. statistical sampling: random selection + the use of probability theory
2. non-statistical sampling: opposite to the statistical sampling