AUDIT SAMPLING
"Audit Sampling" involves the application of audit procedures to less than 100% of
items within an account balance or class of transactions.
SAMPLING RISK
"Sampling risk" arises from the possibility that the auditor's conclusion, based on a
sample may be different from the conclusion reached if the entire population were
subjected to the same audit procedures.
Sampling risk is to be measured and controlled. The auditor controls sampling risk
by specifying the acceptable level when developing the sampling plan.
NONSAMPLING RISK
Nonsampling risk arises from factors that cause the auditor to reach an erroneous
conclusion for any reason not related to the size of the sample. For example, most
audit evidence is persuasive rather than conclusive, the auditor might use
inappropriate procedures, or the auditor might misinterpret evidence and fail to
recognize an error.
Systematic selection
The number of sampling units in the population is divided by the sample size to
give a sampling interval, for example 50, and having determined the starting
point within the first 50, each 50th sampling unit is thereafter selected.
Although the starting point may be determined haphazardly, the sample is
more likely to be truly random if it is determined by use of a computerized
random number generator or random number tables.
When using systematic selection, the auditor would need to determine that
sampling units within the population are not structured in such a way that the
sampling interval corresponds with a particular pattern in the population.
Block selection (or cluster sampling)
It involves selecting a block(s) of contiguous items from within the population.
It cannot ordinarily be used in audit sampling because most populations are
structured such that items in sequence can be expected to have similar
characteristics to each other, but different characteristics from items
elsewhere in the population.
Although in some circumstances it may be an appropriate audit procedure to
examine a block of items, it would rarely be an appropriate sample selection
technique when the auditor intends to draw valid inferences about the entire
population based on the sample.
Haphazard selection
The auditor selects the sample without following a structured technique.
It is not appropriate when using statistical sampling.
Stratification
This involves subdividing a population into subpopulations or strata, i.e., a
group of sampling units which have similar characteristics (often monetary
value).
The strata must be explicitly defined so that each sampling unit can belong to
only one stratum.
This method enables the auditor to direct his efforts towards the items he
considers would potentially contain the greater monetary error.
Determining the maximum population deviation rate (achieved upper deviation limit)
and the allowance for sampling risk (achieved precision).
The maximum deviation rate is based on the sample size and the number of
deviations discovered. There are standard tables that yield maximum
population deviation rates at specified risks of assessing control risk too low.
Allowance for sampling risk = Maximum Deviation Rate – Sample Deviation Rate
Discovery sampling
Appropriate when the expected deviation rate is near zero and when the auditor's
objective is to find at least one deviation in a sample if the actual population
deviation rate exceeds or equals a predetermined critical rate (tolerable
deviation rate).
Population, as defined in PSA 530, means the entire set of data from which a sample is
selected and about which the auditor wishes to draw conclusions. It is important for the
auditor to ensure that the population is
Complete
Can more easily convert the sample into a dual-purpose test useful for substantive
testing.
The risk of incorrect acceptance and the likelihood of assessing control risk too low relate to
the
Tolerable misstatement
The likelihood of assessing control risk too high is the risk that the sample selected to test
controls
Does not support the auditor’s planned assessed level of control risk when the true
operating effectiveness of internal control justifies such an assessment.
Does not support the tolerable misstatement for some or all of management’s
assertions.
While performing a test of details during an audit, the auditor determined that the sample
results supported the conclusion that the recorded account balance was materially misstated.
It was, in fact, not materially misstated. This situation illustrates the risk of
Which of the following sample planning factors would influence the sample size for a
substantive test of details for a specific account?
No No
Yes Yes
No Yes
Yes No
An auditor may select audit procedures that are not appropriate to achieve the
specific objective.
An auditor may fail to recognize errors in the documents examined for the chosen
sample.
The documents related to the chosen sample may not be available for inspection.
Which of the following statistical selection techniques is least desirable for use by an auditor?
The expected deviation rate of client billing errors is 3%. The auditor has established a
tolerable rate of 5%. In the review of client invoices the auditor should use
b. As the population size doubles, the sample size should also double.
c. The qualitative aspects of deviations are not considered by the auditor.
d. There is an inverse relationship between the sample size and the tolerable rate.
Which of the following statistical sampling plans does not use a fixed sample size for tests of
controls?
When performing a test of a control with respect to control over cash receipts, an auditor
may use a systematic sampling technique with a start at any randomly selected item. The
biggest disadvantage of this type of sampling is that the items in the population
Which of the following combinations results in a decrease in sample size in a sample for
attributes?
Expected
Risk of assessing population
control risk too low Tolerable rate deviation rate
The answer is “c”. Allowed Risk of Assessing Control Risk Too Low results in a decrease in sample
size. A higher Expected Tolerable Rate results in a decrease in sample size. A higher Population
Deviation Rate results in a decrease in sample size.
I doubt my copying and pasting rendered correctly but I am mainly asking about the last
sentence in the answer explanation. I thought that if the expected population deviation rate is
higher, it leads to an increase in sample size.
An auditor is testing internal control procedures that are evidenced on an entity’s vouchers by
matching random numbers with voucher numbers. If a random number matches the number of
a voided voucher, that voucher ordinarily should be replaced by another voucher in the
random sample if the voucher
a. Constitutes a deviation
c. Cannot be located.
a. Choose another purchase order to replace the missing purchase order in the sample.
b. Consider this test of control invalid and proceed with substantive tests since
internal control cannot be relied upon.
c. Treat the missing purchase order as a deviation for the purpose of evaluating the
sample.
d. Select a completely new set of 20 purchase orders.
a. Lower than the expected rate of errors in the related accounting records.
b. Higher than the expected rate of errors in the related accounting records.
If the auditor is concerned that a population may contain exceptions, the determination of a
sample size sufficient to include at least one such exception is a characteristic of
Which of the following courses of action would an auditor most likely following planning a
sample of cash disbursements if the auditor is aware of several unusually large cash
disbursements?
a. Set the tolerable rate of deviation at a lower level than originally planned.
c. Increase the sample size to reduce the effect of the unusually large disbursements.
d. Continue to draw new samples until all the unusually large disbursements appear in
the sample.
While performing a test of details during an audit, an auditor determine that the sample
results supported the conclusion that the recorded account balance was materially misstated.
It was, in fact, not materially misstated. This situation illustrates the risk of
c. Incorrect rejection
d Incorrect acceptance.
For which of the following audit tests would an auditor most likely use attribute sampling?
Which of the following factors is usually not considered in determining the sample size for a
test of controls?
The diagram below depicts the auditor’s estimated maximum deviation rate compared with
the tolerable rate and also depicts the true population deviation rate compared with the
tolerable rate.
I c. III
II d. IV
An auditor desired to test credit approval on 10,000 sales invoices processed during the
year. The auditor designed a statistical sample that would provide 1% risk of assessing
control risk too law (99% confidence) that not more than 7% of the sales invoices lacked
approval. The auditor estimated from previous experience that about 2 and ½% of the
sales invoices lacked approval. A sample of 200 invoices was examined and seven of them
were lacking approval. The auditor then determined the achieved upper precision limit to
be 8%.
In the evaluation of this sample, the auditor decided to increase the level of the preliminary
assessment of control risk because the
a. Tolerable rate (7%) was less than the achieved upper precision limit (8%).
b. Expected deviation rate (7%) was more than the percentage of errors in the sample
(3 ½ %).
c. Achieved upper precision limit (8%) was more than the percentage of errors in the
sample (3 ½ %).
d. Expected deviation rate (2 ½ %) was less than the tolerable rate (7%).
a. 5 ½ % c. 3 ½ %
b. 4 ½ % d. 1%
When the auditor goes through a population and selects items for the sample without regard
to their size, source, or other distinguishing characteristics, it is called
When an auditor has chosen a random sample and is using nonstatistical attributes sampling,
the auditor
a. Need not consider the risk of assessing control risk too low.
d. Should compare the deviation rate of the sample to the tolerable deviation rate.
An error that arises from an isolated event that has not recurred other than on specifically
identifiable occasions and is therefore not representative of similar errors in the population is
a/an
The following items apply to random sampling from large populations for attributes
sampling. Select the most appropriate response for each question.
If all other factors specified in a sampling plan remain constant, changing the acceptable risk
of assessing control risk too low from 10 percent to 5 percent would cause the required
sample size to
a. Increase c. Decrease
If all other factors specified in a sampling plan remain constant, changing the tolerable
deviation rate from 8 percent to 12 percent would cause the required sample size to
a. Increase
c. Decrease
d. Become indeterminate
END