Audit sampling is the practice of applying audit methods to a subset of the items in a population that are relevant to the audit so that all sampling units have a chance of being chosen and the auditor has a solid foundation from which to infer information about the complete population. The goal of the audit procedure and the characteristics of the population from which the sample will be formed must both be taken into account by the auditor when creating an audit sample. The auditor must choose a sample size large enough to lower sampling risk to a tolerable level. The sample's items must be chosen by the auditor in a way that gives each sampling unit in the population a chance to be chosen.
ISA
(UK) 530 recognizes that there are many methods of selecting a sample, but it
considers five principal methods of audit sampling which are 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.
§ systematic selection: The method divides the number of sampling
units within a population into the sample size to generate a sampling interval.
§ 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.
§ haphazard selection: When the auditor uses this method of
sampling, he does so without following a structured technique.
§ block selection: This method of sampling involves
selecting a block (or blocks) of contiguous items from within a population.
On
each chosen item, the auditor must conduct audit methods suited to the purpose.
The auditor must undertake the audit procedure on a different item if the
chosen item does not fall inside the purview of the audit procedure. The
auditor must treat a particular item as a deviation from the required control
in tests of controls or as a misstatement in tests of details if the auditor is
unable to apply the specified audit procedures or appropriate alternative
procedures to it.
Any
deviations or misstatements must be investigated for their nature and origin by
the auditor, who must also assess any potential impact on the audit's overall
objective and other audited areas. The auditor must establish with a high
degree of certainty that any misstatement or deviation found in a sample that
the auditor deems to be an anomaly is not indicative of the population, which
happens in very few cases. The auditor must execute extra audit processes to
collect adequate, relevant audit proof that the error or deviation does not influence
the rest of the population in order to reach this level of assurance.
In
designing samples, the auditors identify acceptable misstatements to address
the risk that a combination of individual material misstatements may lead to
material misstatements in the financial statements and provide a margin of
error for misstatements that may go undetected. Tolerable error is the
application of performance materiality to a particular sampling procedure.
Acceptable misstatement may be equal to or less than the materiality of the
performance.
Practice:
When
designing an audit sample, the auditor should consider objectives to be achieved
and the combination of audit procedures likely to best achieve this goal. Consideration
of the nature of the audit evidence sought and possible deviation or
misstatement conditions or other characteristics relating to that audit
evidence will assist the auditor in defining what constitutes a deviation or misstatement
and what population to use for sampling.
Reference: https://bit.ly/3NFhcqk
