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Audit Guide: Audit Sampling

ISBN: 978-1-945498-56-5
208 pages
October 2017
Audit Guide: Audit Sampling (1945498560) cover image

Description

Considered the industry-standard resource and updated as of March 1, 2014, the Audit Sampling Guide summarizes applicable requirements and practices, and delivers “how-to” advice to help auditors apply nonstatistical and statistical sampling.

The guide includes case studies illustrating the use of different sampling methods, including classical variables sampling and monetary unit sampling, in real world situations.

New in 2014, a detailed case study of the application of classical variables sampling with the use of software has been included as an appendix. The appendices also include sampling tables and similar tools, as well as other sampling considerations. Packed with information on sampling requirements and sampling methods, this Guide is an indispensable resource.

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Table of Contents

Introduction 1-22

The Development of Audit Sampling 1-11

The Significance of Audit Sampling  12

The Purpose of This Guide   13-20

Audit Sampling Guidance for Compliance Audits  21-22

1 Characteristics of Audit Sampling 01-29

Audit Sampling Defined   04-05

Procedures That May Not Involve Audit Sampling  06-20

Inquiry and Observation  07

Analytical Procedures   08-09

Procedures Applied to Every Item in a Population   10-12

Some Tests of Controls May Not Involve Audit Sampling 13-14

Tests of Controls When Extrapolation Is Not Intended   15

Procedures That Do Not Evaluate Characteristics   16-17

Untested Balances  18

Tests of Automated IT Controls  19-20

Sampling and Nonsampling Audit Procedures Distinguished  21-25

Terminology Used in This Guide 26-29

Reliability or Confidence Level  27

Sampling Risk  28

Precision  29

2 The Audit Sampling Process 01-55

Purpose and Nature of Audit Sampling 02

How Audit Sampling Differs From Sampling in Other Professions  03-06

Evaluation of Audit Samples   07

Types of Audit Tests    08-14

Tests of Controls  09-10

Substantive Procedures   11

Dual-Purpose Tests  12-14

Risk   15-21

Sampling Risk  19

Nonsampling Risk  20-21

Nonstatistical and Statistical Sampling  22-29

Planning the Audit Sampling Procedures  30-34

Types of Statistical Sampling Plans  35-43

Attributes Sampling 35-37

Variables Sampling 38-41

Relating Balance Sheet and Income Statement Sampling    42-43

General Implementation Considerations  44-55

Continuing Professional Education  45-48

Sampling Guidelines   49

Use of Specialists    50-51

Supervision and Review  52-55

3 Nonstatistical and Statistical Audit Sampling in Tests of Controls 01-98

Determining the Test Objectives  02-05

Defining the Deviation Conditions  06

Defining the Population  07-10

Defining the Period Covered by the Test 11-21

Initial Testing    14

Estimating Population Characteristics 15-17

Considering the Completeness of the Population   18-21

Defining the Sampling Unit  22-24

The Role of Walk-throughs   25-28

Determining the Method of Selecting the Sample 29-36

Simple Random Sampling   30

Systematic Sampling  31-32

Haphazard Sampling   33-34

Block Sampling 35-36

Determining the Sample Size   37-65

Considering Sampling Risk in Assessing Controls Effectiveness 38-45

Considering Other Evidence in Determining Risk of Concluding Controls Are More Effective Than They Actually Are (Overreliance) and Tolerable Rate of Deviation  46

Considering the Risk of Concluding Controls Are More Effective Than They Actually Are (Overreliance) for Multiple Controls Addressing the Same Control Objective    47

Determining the Tolerable Rate of Deviation    48-54

Considering the Expected Population Deviation Rate   55-58

Considering the Effect of Population Size  59-61

Small Populations and Infrequently Operating Controls  62-63

Considering a Sequential or a Fixed Sample Size Approach    64

Developing Sample Size Guidelines  65

Performing the Sampling Plan   66-72

Voided Documents  67

Unused or Inapplicable Documents  68

Mistakes in Estimating Population Sequences  69-70

Stopping the Test Before Completion 71

Inability to Examine Selected Items  72

Evaluating the Sample Results   73-95

Calculating the Deviation Rate  74

Considering Sampling Risk   75-79

Considering the Qualitative Aspects of the Deviations   80-81

Extending the Sample When Control Deviations Are Found    82-84

Assessing the Potential Magnitude of a Control Deficiency    85-94

Reaching an Overall Conclusion  95

Documenting the Sampling Procedure  96-98

4 Nonstatistical and Statistical Audit Sampling for Substantive Tests of Details 01-108

Determining the Test Objectives  04-05

Defining the Population  06-12

Considering the Completeness of the Population   08-10

Identifying Individually Significant Items    11-12

Defining the Sampling Unit  13-14

Choosing an Audit Sampling Technique  15-16

Selecting the Sample  17-22

Determining the Sample Size   23-74

Considering Variation Within the Population  27-32

Determining the Acceptable Level of Risk  33-47

Considering Tolerable Misstatement  48-49

Performance Materiality and Tolerable Misstatement   50-59

Considering the Expected Amount of Misstatement  60-61

Considering the Effect of Population Size  62

Relating the Factors to Determine the Sample Size   63-74

Performing the Sampling Plan   75-76

Evaluating the Sample Results   77-104

Projecting the Misstatement to the Population  77-89

The Sufficiency of Sampling Evidence for Proposing Adjustments 90

Negative Confirmations   91

Interim Sample Results   92

Considering Sampling Risk at the Test Level  93-100

Misstatements Not Projected  101-104

Documenting the Sampling Procedure  105-108

5 Nonstatistical Sampling Case Study 01-16

Determining the Sample Size   08-11

Evaluating the Sample Results   12-16

6 Monetary Unit Sampling 01-63

Selecting a Statistical Approach 04-08

Advantages    05-06

Disadvantages 07-08

Defining the Sampling Unit  09-10

Selecting the Sample  11-19

Determining the Sample Size   20-31

Formula Method—No Misstatements Expected  23-25

Formula Method—Some Misstatements Expected   26-31

Evaluating the Sample Results   32-52

Sample Evaluation With 100 Percent Misstatements   35-41

Sample Evaluation With Less Than 100 Percent Misstatements    42-48

Quantitative Considerations   49-51

Qualitative Considerations   52

MUS Sampling Case Study   53-63

Selecting the Sample   56-58

Evaluating the Sample Results 59-63

7 Classical Variables Sampling 01-48

Selecting a Statistical Approach 03-06

Advantages    04

Disadvantages 05-06

Types of Classical Variables Sampling Techniques  07-10

Mean-Per-Unit Approach   08

Difference Approach   09

Ratio Approach  10

Choosing a Classical Variables Sampling Approach   11-15

The Ability to Design a Stratified Sample 12

The Expected Number of Differences Between the Audited and Recorded Amounts  13

Required Information   14-15

Determining the Sample Size   16-24

Considering Variation Within the Population  17-19

Calculating the Sample Size  20-24

Evaluating the Sample Results   25-39

Classical Variables Sampling Case Study    40-48

Appendix

A Attributes Statistical Sampling Tables

B Sequential Sampling for Tests of Controls

C Monetary Unit Sampling Tables

D Ratio of Desired Allowance for Sampling Risk of Incorrect Rejection to Tolerable Misstatement

E Multilocation Sampling Considerations

F Case Study Using Software to Plan and Evaluate a Classical Variables Sample

G Glossary

H Overview of Statements on Quality Control Standards

I Schedule of Changes Made to the Text From the Previous Edition

Index of Pronouncements and Other Technical Guidance

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