Powered by Blogger. Popular Posts What are current and Permanent Audit files? Advantages and disadvantages of audit committees. Advantages and disadvantages of statutory audits. Advantages and disadvantages of Analytical procedures. Advantages and disadvantages of Computer assisted audit techniques. Advantages of Statistical Sampling in Auditing? The advantages of statistical sampling may be summarized as follows -.
The amount of testing sample size does not increase in proportion to the increase in the size of the area universe tested. Non-sampling risk is the risk that the auditor forms the wrong conclusion, which is unrelated to sampling risk. An example of such a situation would be where the auditor adopts inappropriate audit procedures, or does not recognise a control deviation.
ISA recognises that there are many methods of selecting a sample, but it considers five principal methods of audit sampling as follows:.
Random selection This method of sampling ensures that all items within a population stand an equal chance of selection by the use of random number tables or random number generators. The sampling units could be physical items, such as sales invoices or monetary units. Systematic selection The method divides the number of sampling units within a population into the sample size to generate a sampling interval. Consider the following example:.
Example 1 You are the auditor of Jones Co and are undertaking substantive testing on the sales for the year ended 31 December The random number generator has suggested a start of 42 and the sample size is Monetary unit sampling The method of sampling is a value-weighted selection whereby sample size, selection and evaluation will result in a conclusion in monetary amounts.
The objective of monetary unit sampling MUS is to determine the accuracy of financial accounts. The steps involved in monetary unit sampling are to:.
Haphazard sampling When the auditor uses this method of sampling, he does so without following a structured technique. ISA also recognises that this method of sampling is not appropriate when using statistical sampling see further in the article.
Care must be taken by the auditor when adopting haphazard sampling to avoid any conscious bias or predictability. The objective of audit sampling is to ensure that all items that make up a population stand an equal chance of selection.
This objective cannot be achieved if the auditor deliberately avoids items that are difficult to locate or deliberately avoids certain items. Block selection This method of sampling involves selecting a block or blocks of contiguous items from within a population. Block selection is rarely used in modern auditing merely because valid references cannot be made beyond the period or block examined.
In situations when the auditor uses block selection as a sampling technique, many blocks should be selected to help minimise sampling risk. An example of block selection is where the auditor may examine all the remittances from customers in the month of January. Similarly, the auditor may only examine remittance advices that are numbered to Random selection of the sample items, and ii.
The use of probability theory to evaluate sample results, including measurement of sampling risk. The ISA goes on to specify that a sampling approach that does not possess the characteristics in i and ii above is considered non-statistical sampling. The above sampling methods can be summarised into statistical and non-statistical sampling as follows:. Statistical sampling allows each sampling unit to stand an equal chance of selection.
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