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Basic Audit Sampling Concepts

This document discusses key concepts related to audit sampling, including: - Audit sampling involves selecting a sample from a population to make inferences about the entire population. It allows auditors to test a subset of items rather than the entire population. - Auditors use sampling to ensure all population items have an equal chance of selection and to efficiently test large populations. There is a risk conclusions could differ for the full population versus the sample. - Samples must be representative of the population. Stratification divides a population into subgroups with similar characteristics to improve precision. - Attribute sampling measures qualitative characteristics while variable sampling measures quantitative values. Factors like objectives, risk, tolerable error are considered in sample design.

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Pam Intruzo
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137 views

Basic Audit Sampling Concepts

This document discusses key concepts related to audit sampling, including: - Audit sampling involves selecting a sample from a population to make inferences about the entire population. It allows auditors to test a subset of items rather than the entire population. - Auditors use sampling to ensure all population items have an equal chance of selection and to efficiently test large populations. There is a risk conclusions could differ for the full population versus the sample. - Samples must be representative of the population. Stratification divides a population into subgroups with similar characteristics to improve precision. - Attribute sampling measures qualitative characteristics while variable sampling measures quantitative values. Factors like objectives, risk, tolerable error are considered in sample design.

Uploaded by

Pam Intruzo
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Chapter 16 - BASIC AUDIT SAMPLING CONCEPTS

1. What is meant by audit sampling?


- Audit sampling is a process whereby information is gained concerning the characteristics of
population.

2. Why do auditors use audit sampling?


- Because they need to ensure that all items that make up a population stand an equal chance of
selection.

3. Distinguish between sampling and non-sampling risk.


- Sampling Risk : risk that the auditors opinion would have been different if the
procedures were applied to the entire population of the data and not just one a sample

- Non- sampling risk : risk that despite having selected an appropriate sample, the auditors will arrive at
wrong conclusion

4. Why must an audit sample be representative of the population from which it is drawn?
- Sample is an item taken from the large population to represent that population.
In auditing sample is transactions which are part of large transaction which are tested by auditor so that
auditor can conclude whether the transaction comply with all assertion related with that transaction.

5. Distinguish between attribute estimate procedures and variables estimation procedures.


- Attribute estimate procedures measure qualitative characteristics. The auditor must consider both the
risk of overreliance and underreliance.
- Variables estimate procedures measure quantitative characteristics. The auditor is exposed into risk of
incorrect rejection and the risk of incorrect acceptance.

6. What are the factors to be considered in designing an audit sample.


- Audit objectives
- Population and its characteristics
- Risk and assurance
- Tolerable error
- Expected error in the population
- Stratification

7. What is meant by stratification in audit sampling?


- The process of dividing a population into subpopulation which have similar characteristics.
8. What are the advantages using stratification in audit sampling?
- A stratified sample can provide greater precision than a simple random sample of the same size.
Because it provides greater precision, a stratified sample often requires a smaller sample, which saves
money.
9. Give and explain briefly the four most commonly used sample selection methods for statistical and non
statistical sampling.
- Random sampling : every item in a population has an equal chance of being selected
- Systematic sampling : auditor counts through the population and selects items on the basis of
sampling interval
- Stratified Random sampling : auditor groups the population into subpopulation
- Sampling w/ Probability Proportional to Size : emphasizes larger peso items w/in an account balance

10. How can the auditor control sampling risk?


- Auditors can measure how much the risk they face and control it by either increase or
decrease sample size to have a reasonable low risk.
11. Explain briefly the different audit sampling plans the auditor can use.
- Audit sampling can be divided into 2 plans. First, attributes sampling in tests of control and variable
sampling in substantive tests of details. These plans are divided into statistical and nonstatistical.

12. Discuss briefly the steps involve in evaluating sample results.


- Analyze any error detected in the sample : auditor should consider the sample results, the nature and
cause of any errors identified, and their possible effect
- Project the errors found in the sample to the population : when projecting error results, the auditor
should keep in mind the qualitative aspects of the errors found.
- Assess the sampling risk : the auditor should evaluate the sample results to determine whether the
assessment is confirmed or needs to be revised.

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