Question

The auditors know that it may not be practical to examine all available evidence on the basis of its volume and dispersion. In these cases, a sample is chosen to be measured against the audit requirements and to help establish the conclusion of the audit. Identify the sampling of the audit, the methods used, and describe the possibility of sampling risk.

Answer 1

AUDIT SAMPLING: The application of audit procedures to less than 100% of items within a population such that all sampling units have a chance of selection in order to draw conclusions about the entire population The requirements relating to sample design, sample size and selection of items for testing are explained below

1. Sample Design: When designing an audit sample, the auditor shall consider the purpose of the audit procedure and the characteristics of the population from which the sample will be drawn

2. Sample Size: The auditor shall determine a sample size sufficient to reduce sampling risk to an acceptably low level.

3. Sample Selection: The auditor shall select items for the sample in such a way that each sampling unit in the population has a chance of selection,

SAMPLING RISK CAN LEAD TO TWO TYPES OF ERRONEOUS CONCLUSIONS:

i)In the case of a test of controls that controls are more effective than they actually are, or in

the case of a test of details, that a material misstatement does not exist when in fact it does

It affects audit effectiveness and is more likely to lead to an inappropriate opinion.

i) In the case of a test of controls, that controls are less effective than they actually are, or in the case of a test of details that a material misstatement exists when in fact it does not

• It affects audit efficiency as it would usually lead to additional work to establish that initial conclusions were incorrect.