Question

Describe the audit sampling plan to perform a test of controls

Answer 1

The audit sampling plan performs a test of controls using either a fixed sampling plan or sequential sampling plan. In a fixed sampling plan, the auditor examines a single sample of a specified size, and in sequential sampling plan, the sample is selected in various steps, with each step conditional on the results of the previous steps. The decision of choosing among fixed or a sequential sampling plan depends upon which plan the auditor believes to be effective in the circumstances.

A single sample plan has a fixed sample size, and permits the auditor to make an accept/reject decision after inspecting a fixed number of samples. Thus in planning a fixed sampling application, the auditor takes into consideration if the deviation rate is higher than the specified expected population deviation rate, the sample results would suggest that the estimated population deviation rate plus an allowance for sampling risks is higher than the tolerable deviation rate. In such scenario the sample result would not support the auditor's planned assessed level of control risk

The sequential sampling plans don't have a fixed sample size. In a sequential sampling plan consists of two or four groups of sampling units; and auditor determines the sizes of the individual groups of sampling units based on the specified risk of overreliance, the tolerable rate of deviation and expected population deviation rate. The auditor examines the first group of sampling units and depending upon the results makes a decision whether to 1) accept the assessed level of control risk as planned, without examining additional units 2) stop sampling since the planned confidence and tolerable deviation cannot be achieved because of too many deviations