No matter it is a financial audit, internal audit and other kinds of audit, audit sampling still needs to be used by auditors. Audit sampling also part of the audit standards requirements and it could help auditors to meet their objective with less effort. Statistic audit sampling is the sampling approach where auditor uses random sampling to select the items from the total population use the probabilities technique to measure the result of the testing and make a conclusion.
This because statistics, we use data and probabilities to select the items from the total population and those data are not prejudged and unbiased by auditors. This statistic sampling normally performs where the total population is more than items. Based on experiences, there are many different tools available in the market that we use could use to perform audit sampling.
For example, auditors verifying the addition of the fixed asset during the year and the total purchase transactions are more than items. You are an auditor and is assigning to perform testing on fixed assets addition. Statistical sampling is highly recommended in the audit program. And random sampling is the method you decided to use. In the statistical sampling, you can consider select 10 items from the total population randomly or you can set internal every item that reaches the interval set.
That means every item among items has the same chance to be selected for verification. Once you completed your testing, and got the result and then make a conclusion base on the result.
So, this is how statistical sampling looks like and how it is using. The two important things you need to remember about statistical sampling are the items are selected randomly and the conclusion is made based on the result of testing. If either of these two things is not meet, then the sampling is called non-statistic.
Non-statistical sampling, by the way, is different from the statistic. Based on the theory from ISA, any method that not mean the criteria of the statistic is non-statistic. Block selection This method of sampling involves selecting a block or blocks of contiguous items from within a population. Block selection is rarely used in modern auditing merely because valid references cannot be made beyond the period or block examined.
In situations when the auditor uses block selection as a sampling technique, many blocks should be selected to help minimise sampling risk. An example of block selection is where the auditor may examine all the remittances from customers in the month of January. Similarly, the auditor may only examine remittance advices that are numbered to Random selection of the sample items, and ii.
The use of probability theory to evaluate sample results, including measurement of sampling risk. The ISA goes on to specify that a sampling approach that does not possess the characteristics in i and ii above is considered non-statistical sampling.
The above sampling methods can be summarised into statistical and non-statistical sampling as follows:. Statistical sampling allows each sampling unit to stand an equal chance of selection.
Keeping the objective of sampling in mind, which is to provide a reasonable basis for the auditor to draw valid conclusions and ensuring that all samples are representative of their population, will avoid bias. Paper F8 and FAU students must ensure they fully understand the various sampling methods available to auditors.
In reality there are a number of ways in which sampling can be applied that ISA recognises — however, the standard itself covers the principal methods. Students must ensure they can discuss the results of audit sampling and form a conclusion as to whether additional work would need to be undertaken to reduce the risk of material misstatement.
Audit sampling. ISA recognises that sampling risk can lead to two types of erroneous conclusion: The auditor concludes that controls are operating effectively, when in fact they are not. Insofar as substantive testing is concerned which is primarily used to test for material misstatement , the auditor may conclude that a material misstatement does not exist, when in fact it does.
These erroneous conclusions will more than likely lead to an incorrect opinion being formed by the auditor. The auditor concludes that controls are not operating effectively, when in fact they are. In terms of substantive testing, the auditor may conclude that a material misstatement exists when, in fact, it does not. In contrast to leading to an incorrect opinion, these errors of conclusion will lead to additional work, which would otherwise be unnecessary leading to audit inefficiency.
Methods of sampling ISA recognises that there are many methods of selecting a sample, but it considers five principal methods of audit sampling as follows: random selection systematic selection monetary unit sampling haphazard selection, and block selection.
Consider the following example: Example 1 You are the auditor of Jones Co and are undertaking substantive testing on the sales for the year ended 31 December The steps involved in monetary unit sampling are to: determine a sample size select the sample perform the audit procedures evaluate the results and arriving at a conclusion about the population. Conclusion Paper F8 and FAU students must ensure they fully understand the various sampling methods available to auditors.
Written by a member of the F8 examining team References 1. ISA , paragraph 5 a 2.
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