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2000 Prentice Hall,Inc.
14AUDIT SAMPLING FORTESTS OF CONTROLSAND SUBSTANTIVE TESTSOF TRANSACTIONS
IF YOUR ARE NOT GOING TO
BELIEVE IT,DON’T USE IT
Arens,Loebbecke; Auditing,8/E
2000 Prentice Hall,Inc.
Representative Samples
Characteristics in the sample of audit
interest are approximately the same
as those of the population.
1,Nonsampling risk (nonsampling error) occurs when
audit tests do not uncover existing exceptions in the sample.
2,Sampling risk (sampling error) is an inherent part of
sampling that results from testing less than the entire
population.
Arens,Loebbecke; Auditing,8/E
2000 Prentice Hall,Inc.
Probabilistic Versus Nonprobabilistic
Sample Selection
Nonprobabilistic (judgmental) sample selection:
1,Directed sample selection
2,Block sample selection
3,Haphazard sample selection
Probabilistic sample selection:
1,Simple random sample selection
2,Systematic sample selection
3,Stratified sample selection
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Directed Sample Selection:
Selection of items in the sample based on
some judgmental criteria established by
the auditor.
Items Most Likely to Contain Misstatements
Items Containing Selected
Population Characteristics
Large Dollar Coverage
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Block Sample Selection:
Selection of several items in sequence.
Haphazard Sample Selection:
Selection of items without any bias on the
part of the auditor.
Arens,Loebbecke; Auditing,8/E
2000 Prentice Hall,Inc.
Simple Random Sample Selection:
Every possible combination of elements in the
population that has an equal chance of constituting
the sample.
Random Number Tables
Computer Generation of
Random Numbers
Arens,Loebbecke; Auditing,8/E
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Systematic Sample Selection:
The auditor calculates an interval and then
methodically selects the items for the sample.
Probability Proportional to Size:
Take a sample where the probability of selecting
any individual population item is proportional
to its recorded amount.
Stratified Sample Selection:
Divided the population into subpopulations by size
and take large sample of the larger subpopulations.
Arens,Loebbecke; Auditing,8/E
2000 Prentice Hall,Inc.
Statistical Versus Nonstatistical Sampling
Statistical sampling allows the quantification (measurement)
of sampling risk in planning the sample (Step #1) and evaluating
the results (Step #3).
In nonstatistical sampling,the auditor selects items that he or she
believes will provide the most useful information in the
circumstances.
Arens,Loebbecke; Auditing,8/E
2000 Prentice Hall,Inc.
State the objectives of the audit test,
(in this Ch.,it is to test controls - TOC’s)
Decide whether audit sampling applies.
Define attributes and exception conditions.
Define the population.
Define the sampling unit,Continued
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Specify the tolerable exception rate.
Specify acceptable risk of assessing control
risk too low.
Estimate the population exception rate.
Determine the initial sample size.
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2000 Prentice Hall,Inc.
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Generalize from the sample to the population,
Analyze exceptions.
Decide the acceptability of the population,
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1,Select the table corresponding to
the ARACR.
2,Locate the TER at the top of the table.
3,Locate the EPER in the far left column.
4,Read down the appropriate TER column
until it intersects with the appropriate
EPER row,The number at the
intersection is the initial sample size.
Arens,Loebbecke; Auditing,8/E
2000 Prentice Hall,Inc.
TABLE 14 - 1 Terms Used in Audit Sampling
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TABLE 14 - 3
Guidelines for ARACR and TER for Nonstatistical Sampling,
Tests of Controls
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2000 Prentice Hall,Inc.
TABLE 14 - 4
Guidelines for ARACR and TER for Nonstatistical Sampling,
Substantive Tests of Transactions
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2000 Prentice Hall,Inc.
TABLE 14 - 5
Effect on Sample Size of Changing Factors
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2000 Prentice Hall,Inc.
FIGURE 14 - 2
Summary of
Audit
Sampling Steps
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2000 Prentice Hall,Inc.
FIGURE 14 - 3
Attributes Sampling
Data Sheets,
Attributes
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2000 Prentice Hall,Inc.
FIGURE 14 - 4
Inspection of Sample
Items for Attributes
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2000 Prentice Hall,Inc.
FIGURE 14 - 6
Analysis of
Exceptions
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2000 Prentice Hall,Inc.
Nonprobabilistic sample selection
Nonsampling risk
Nonstatistical sampling
Occurrence rate
Probabilistic sample selection
Random number table
Random sample
Representative sample
Sample exception rate (SER)
Sampling distribution
Sampling risk
Systematic sample selection
Tolerable exception rate (TER)
Acceptable risk of assessing
control risk too low (ARACR)
Attribute
Attributes sampling
Audit sampling
Block sample selection
Computed upper exception
rate (CUER)
Directed sample selection
Estimated population exception
rate (EPER)
Exception rate
Haphazard sample selection
Initial sample size
Judgmental sampling