Lesson 6 - ISA 530: Audit sampling

Question 1

What is the objective of ISA 530: Audit sampling?

Answer 1

The objective of the auditor, when using audit sampling is to provide a reasonable basis for the auditor to draw conclusions about the population from which the sample is selected.

Question 2

ISA 530: Audit sampling

Define audit sampling.

Answer 2

The application of audit procedures to less than 100% of items within a population of audit relevance such that all sampling units have a chance of selection in order to provide the auditor with a reasonable basis on which to draw conclusions about the entire population.

Question 3

ISA 530: Audit sampling

Define population.

Answer 3

The entire set of data from which a sample is selected and about which the auditor wishes to draw conclusions.

Question 4

ISA 530: Audit sampling

Define sampling risk.

Answer 4

The risk that the auditor’s conclusion based on a sample may be different from the conclusion if the entire population were subject to the same audit procedure. Sampling risk can lead to two erroneous conclusions:

i) In the case of a test of controls, that controls are more effective than what they are, or in the case of a test of details, that a material misstatement does not exist when in fact it does.

ii) In the case of controls, that controls are less effective than what they are, or in a test of detail, that a material misstatement exists when in fact it does not.

Question 5

ISA 530: Audit sampling

Define anomaly.

Answer 5

A misstatement or deviation that is demonstrably not representative of misstatement or deviations in a population.

Question 6

ISA 530: Audit sampling

What is statistical sampling?

Answer 6

An approach to sampling that has the following characteristics:

i) Random selection of the sample items; and
ii) The use of probability theory to evaluate sample results, including measurement of sampling risk.

Question 7

ISA 530: Audit sampling

Define stratification.

Answer 7

The process of dividing a population into sub-populations each of which is a group of sampling units which have similar characteristics.

Question 8

ISA 530: Audit sampling

Define tolerable misstatement.

Answer 8

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.