2. STATISTICAL TOOLS FOR AUDITING
Part Four

3. CHAPTER 8
AUDIT SAMPLING: AN OVERVIEW AND APPLICATION TO TESTS OF CONTROLS
Chapter 8

4. SAMPLING DEFINED
SAS No. 39 defines audit sampling as the application of an audit procedure to less than 100 percent of the items within an account balance or class of transactions for the purpose of evaluating some characteristic of the balance or class (AU ).

5. AUDIT PROCEDURES THAT DO NOT INVOLVE AUDIT SAMPLING
Inquiry and observation
Analytical procedures
Procedures applied to every item in the population
Classes of transactions or account balances not tested
Tests of automated information technology controls.

6. TERMINOLOGY Sampling risk Type I and Type II errors
Risk of assessing CR too high / Risk of incorrect rejection
Risk of assessing CR too low / Risk of incorrect acceptance
Precision

7. TYPES OF AUDIT SAMPLING
Nonstatistical versus statistical sampling
Types of statistical sampling techniques
Attribute sampling
Monetary-unit sampling
Classical variables sampling

8. ATTRIBUTE SAMPLING APPLIED TO TESTS OF CONTROLS
Attribute sampling is a statistical method used to estimate the proportion of a characteristic in a population.
The auditor is normally attempting to determine the operating effectiveness of a control procedure in terms of deviations from the prescribed internal control.

9. PHASES IN AN ATTRIBUTE SAMPLING APPLICATION
Planning
Performance
Evaluation

10. PLANNING Determine the tests objective(s).
Define the control deviation conditions.
Define the population.
Define the period covered by the test.
Define the sampling unit.

11. PLANNING Determine sample size:
Determine the acceptable risk of assessing control risk too low.
Determine the tolerable deviation rate.
Determine the expected population deviation rate.
Consider the effect of population size.

12. PERFORMANCE Randomly select the sample items.
Perform the audit procedures.

13. SPECIAL SITUATIONS IN PERFORMING THE AUDIT PROCEDURES
Voided documents.
Unused or inapplicable documents.
Inability to examine a sample item.
Stopping the test before completion.

14. EVALUATION Calculating the sample results. Performing error analysis.
Drawing final conclusions (see Table 8-6)

15. Table 8-5. The Auditor's Risks When Evaluating Sample Evidence

16. AN EXAMPLE OF A SAMPLING PLAN

17. THE RESULTS OF TESTS OF CONTROLS

18. CHAPTER 8
AUDIT SAMPLING: AN OVERVIEW AND APPLICATION TO TESTS OF CONTROLS
Chapter 8