application of audit procedures to less than 1.

100% Testing
3
AUDIT SAMPLING 100% of the sample population; sample
selected is a representation of the population
Reasons: 1. Small population with large value items
2. computer performs 100% examination
cost effective
Sampling Risks – risks that a conclusions based on a sample would be different from conclusion
3. RMM are high, no sufficient evidence
based on 100% testing TERMS 2. Selecting specific items
- can be eliminated by 100% testing Population – entire set of data  High value or key items
- ↑SS = ↓SR Sample – portion of population subject
 All items over a certain amount
to audit testing
 Items to obtain information
A lpha Risk B eta Risk
Sampling Unit – individual items
 Items to test control activities
 Risk of Underreliance TOC  Risk of Overreliance SAMPLING TECHNIQUES
↑CR than actual CR ↓CR than actual CR Audit Procedures
1. RAP – “research” sampling 1. Random Number sampling
 Risk of Incorrect Rejection ST  Risk of Incorrect Acceptance 2. TOC – w/ docs  sampling -assign # to every item in the population
materially misstated when not not materially misstated when it is w/o docs  sampling -generate numbers
3. ST – TOD  sampling
AURcy Efficiency
vs BOAness Effectiveness Sampling w/ replacement → multiple chances
AP  sampling “Re-place”
additional work less audit procedures
w/o replacement → only one chance
To reduce: increase sample size 2. Systematic Sampling / Selection
use appropriate method of selecting sample items from the population -select samples based on an interval
(pattern on the population size)
Non-sampling Risks – risks of incorrect conclusion due to causes not related to SS Pop
100
every 5th item =
- cannot be eliminated SS
20
- can only be controlled by proper planning & instruction 3. Haphazard Sampling
- “conduct peer review” -select samples w/o regard for any
 Human Errors particular characteristics
 Inappropriate application of audit procedures -there must be proper supervision
 Failure to recognize the errors 4. Block/Cluster Sampling
 Misinterpretation of audit evidence -least desirable sampling technique
-select samples based on particular
SAMPLING APPROACHES Consistent characteristic
1. Statistical Sampling
↑EstPopDeviationRate = ↑SS
-uses probability theory in selecting samples + prof. judgment
-can quantify sampling risk Special Items in Sampling
-↑cost Sampling Risk ±3% a. Voided Documents (cancelled)
100 SS *if properly voided – replace w/ another
= 1000
Confidence
PopLevel ±97% sample
*if NOT properly voided – consider as
deviation
2. Non-statistical Sampling
b. Missing Documents
-uses prof. judgment only
-treat as deviations
-cannot qualify sampling risk(↑or↓ only)

AUDIT PROCEDURE (use sampling)

1. TOC – effectiveness of control

characteristic / attribute of ctrl → effective
results
missing / ineffective ctrl → not effective
violations→deviations

2. ST – detect material misstatement

fairly stated
results
materially stated
errors→misstatement