0 оценок0% нашли этот документ полезным (0 голосов)

18 просмотров48 страницchapter 2 audtng presentation

Oct 06, 2016

© © All Rights Reserved

PPTX, PDF, TXT или читайте онлайн в Scribd

chapter 2 audtng presentation

© All Rights Reserved

0 оценок0% нашли этот документ полезным (0 голосов)

18 просмотров48 страницchapter 2 audtng presentation

© All Rights Reserved

Вы находитесь на странице: 1из 48

sampling plan?

ANSWER 1

The two types of sampling plan are:

a. Attributes sampling. It is a statistical approach used

with test of controls. In testing for attributes, the auditor is

typically concerned with the qualitative characteristics or

attributes of the population, and is used to estimate the

proportion of deviations associated with a particular set of

controls. For example, purchase orders need to be

authorized, and attributes sampling are used to estimate the

proportion of times or percentage that such documents have

not been authorized. Based on the deviation or occurrence

rate computed in the sample, the auditor decides if control

risk can be assessed at below the maximum level.

sampling plan?

b. Variables sampling. It is a form of

sampling used to provide a numerical estimate

of a population, such as the true balance of an

account. It is used to determine whether

account balances in the entitys book are fairly

stated. Variables estimation sampling is used by

the auditor when performing substantive test of

details.

in attributes sampling?

Answer 2:

The steps involved in attributes sampling are:

1. Determining the objectives of the test. Test of controls are

designed to provide reasonable assurance that internal control

operating effectively. Attributes sampling is usually used when there is

a trail of documentary evidence.

2. Defining the attribute and deviation conditions. An auditor should

identify characteristics or attributes that would indicate operation of

the internal controls. The auditor then defines the possible deviation

conditions. For instance, a control procedure requires that each check

be signed by the treasurer before given to a payee. Hence, a released

check that was not signed or signed by an employee other than the

treasurer constitutes a deviation.

in attributes sampling?

Answer 2:

3. Defining the population. For test of controls, the population is the

class of transactions being tested. Conclusions based on sample results

can only be projected to the population from which the sample was

selected.

It is important for the auditor to ensure that the population is:

a. Appropriate to the objective of the sampling procedure. The direction

of testing must be considered. For example, if the auditors objective is to

test for overstatement of accounts payable, the population should be the

accounts payable listing. Conversely, when testing for understatement of

accounts payable, the population should be subsequent disbursements,

unpaid invoices, suppliers statements or unmatched receiving reports.

b. Complete. For example, if the auditor intends to select payment

vouchers from a file, conclusions cannot be drawn about all vouchers for

the period unless the auditor is satisfied that all vouchers have in fact been

filed.

in attributes sampling?

Answer 2:

4. Determining the method of selecting the sample. The

common methods for selecting samples are random sampling

and systematic sampling.

5. Determining the sample size. Determining the appropriate

sample size for attributes sampling is very important. If sample

items chosen to be examined are very few in relation to the

entire population, there is a high probability that existing

deviations in the clients internal control will not be detected

while performing test of controls. This is because deviations may

not be present in the relatively fewer samples examined but

rather in the other units of the population. If the sample size is

increased, the risk that an existing deviation will not be

discovered during tests of controls is considerably decreased.

in attributes sampling?

Answer 2:

6. Performing the sampling plan. The auditor should

apply appropriate audit procedures to all items in the

sample to determine if there are any deviations from

the prescribed control procedures.

7. Evaluating the sample results. The auditor should

interpret the sampling results carefully and make

conclusions with respect to the population from which

the samples are taken.

8. Documenting the sampling procedure. Each of the

prior 7 steps and the conclusions reached should be

documented in the working papers.

affect sample size for test of controls?

Answer 3:

PSA 530 requires the auditor to determine a

sample size sufficient to reduce sampling risk to

an acceptably low level. The following table

presents the factors that affect sample size for

test of controls and their effects on the sample

size:

affect sample size for test of controls?

ATTRIBUTES SAMPLING (TEST OF CONTROLS)

SUMMARY OF RELATIONSHIPS OF FACTORS TO SAMPLE SIZE

Increase in

Intended reliance of internal

control

Tolerable deviation rate

Expected population deviation

rate

Acceptable risk of assessing

control risk too low

Required confidence level

Number of sampling units

Increase

Decrease

Increase

Decrease

Increase

Negligible effect

the auditors intended reliance on the clients

internal control and the sample size for test of

controls.

Answer 4:

The more the auditor intends to rely on the

operating effectiveness of the clients internal controls,

the lower the auditors assessed level of control risk,

and the larger the sample size for test of controls will

need to be. Simply stated, when the auditor expects

that the internal control is effective, the auditor is

required to perform test of controls to support such

expectation. Hence, the greater the reliance the

auditor places on the operating effectiveness of the

controls, the greater is the extent of test of controls

needed (sample size is increased).

tolerable deviation rate and the sample size for tests of

controls.

Answer 5:

Tolerable deviation rate refers to a rate of deviation from

prescribed internal control procedures set by the auditor in

respect of which the auditor seeks to obtain an appropriate

level of assurance that the rate of deviation set by the auditor is

not exceeded by the actual rate of deviation in the population.

Simply stated, the tolerable rate of deviation represents the

maximum deviation rate from the prescribed control procedure

that the auditor could accept and still conclude that the design

and operation of an internal control is effective.

The higher the rate of deviation that the auditor can tolerate,

the lower the sample size for test of controls needs to be.

the expected population deviation rate and the

sample size for test of controls.

Answer 6:

Expected population deviation rate is the rate of

deviation from the prescribed control procedure the

auditor expects to find in the population. The higher

the expected rate of deviation of the population to be

tested, the larger the sample size needs to be so that

the auditor will be able to make a reasonable estimate

of the actual or true rate of deviation.

the allowable risk of assessing control risk too

low and the sample size for test of controls.

Answer 7:

The greater the allowable risk of assessing

control risk too low, the lower the sample size

for test of controls needs to be:

the auditors required confidence level with the

sample size for test of controls.

Answer 8:

The auditors required confidence level is the

mathematical complement of sampling risk (the

risk in assessing control risk too low in the case

of test of controls). The greater the level of

confidence that the auditor desires that the

results of the sample are in fact indicative of

the actual incidence of deviation in the

population, the larger the sample size for test of

controls needs to be.

the number of sampling units in the population

and the sample size for test of controls.

Answer 9:

For large populations, the actual size of the

population has little or minimal effect on

sample size for test of controls.

be applied on the samples chosen.

Answer 10:

The auditor should apply audit procedures to examine the samples

chosen. If the audit procedure is not applicable to the selected item,

the auditor shall perform the procedure on a replacement item. For

instance, when a voided check is selected while testing for evidence

of payment authorization and check has been properly voided to the

auditors satisfaction, such is not considered a deviation.

Consequently, the auditor should perform the procedure on an

appropriately chosen replacement item.

If the auditor is unable to perform the planned audit procedures to

a selected item because documentation relating to that item has

been lost or apparently destroyed, the auditor shall treat such item

as a deviation from the prescribed control in the case of test of

controls, or a misstatement, in the case of details, provided that

alternative procedure are not available.

evaluating sample results for test of controls.

Answer 11:

The procedures to evaluate sample results for test of controls

include:

a. Calculating the sample deviation rate (the auditors estimate of

the true but unknown population deviation rate).

Sample Deviation Rate = Number of deviations observed

Sample size

b. Determining the maximum population deviation rate (upper deviation

limit, upper occurrence limit, achieved upper precision limit).

Maximum

= Sample Deviation Rate

Risk

Population Rate

evaluating sample results for test of controls.

Answer 11:

d. Considering the qualitative aspects of the deviations

discovered.

The auditor should investigate the nature (whether intentional

or unintentional) and causes of any deviations identified, and

evaluate their possible effects (s) on the purpose of the audit

procedure and on other areas of the audit. In extremely rare

circumstances when the auditors considers a deviation discovered

in a sample to be an anomaly, the auditor shall obtain a high

degree of certainty that such deviation is not representative of the

population. The auditor should consider performing additional

audit procedures to obtain sufficient appropriate audit evidence

that the deviation does not affect the remainder of the population.

evaluating sample results for test of controls.

Answer 11:

e. Reach a conclusion.

The auditor should evaluate the sample results to determine

whether the preliminary assessment of the relevant characteristic of

the population is confirmed or needs to be revised.

In the case of a test of controls,

If

deviation rate, this may indicate a higher risk of material misstatement

than originally planned. The auditor should, therefore, increase the

planned assessed level of control risk and consequently increase the

scope of his substantive procedures.

If the maximum population deviation rate is lower than the tolerable

deviation rate, this may indicate a lower risk of material misstatement

than originally planned. The auditor should accept the sample results as

support to the planned assessed level of control risk and the scope of his

substantive procedures need to be modified.

evaluate sample result for tests of controls given

the following information:

Allowable risk of assessing control risk too low

5.0%

Tolerable deviation rate

6.0%

Expected Population Deviation rate

2.5%

The auditor discovered 8 deviations while examining

the samples.

Answer 12:

By referencing to the sample table shown below:

Since the auditor discovered 8 deviations, then sample

deviation rate must be 8/150 or 5.3%.

Based on a 5% risk of assessing control risk too low and 8

deviations found, the maximum population deviation rate can

be computed using the following table.

Answer 12:

The maximum population deviation rate is equal to

9.5%. The allowance for sampling risk can be

computed as 9.5% - 5.3% or 4.2%.

Based on the sample results, there is a 5% chance of

the true population deviation rate being greater than

or equal to 9.5%.

Since the maximum population deviation rate (9.5%)

exceeds the tolerable rate (6%), the sample results

indicate that control risk for the control procedure

being tested is higher than planned and therefore, the

scope of resulting substantive procedures must be

increased.

sampling techniques used for attributes

sampling?

Answer 13:

Audit samples are usually designed a fixed-size approach. However, other

techniques such as sequential and discovery sampling, which do not used

fixed sample size, may also be used.

Sequential or stop-or-go sampling is a sampling technique wherein the

auditor chooses a single or a group of items in a given time interval, conducts

his examination, analyzes the results then audits another group of items if

needed and so on. Simply stated, it involves a sampling plan for which the

sample is selected in several steps, with the need to perform each step

conditional on the results of the previous steps.

Discovery sampling, on the other hand, is a sampling plan which selects a

sample of a given size, accepts the population if the sample is free of error,

and rejects the population if it contains at least one error. With discovery

sampling, the auditor may not be interested in determining how many error

there are in the population. It is often used in situations where the expected

population deviation rate is near zero, and hence a single error is very critical.

involved in variables sampling?

Answer 14:

The steps involved in variables sampling are:

1. Determine the objectives of the test. Variables sampling is used

primarily for substantive testing and that its conclusion is generally

stated in peso terms and in quantities.

2. Define the population. The population should consist of the items

constituting the account balances or class of transaction of interest.

Items that are individually significant for which sampling risk is not

justified should be tested separately and not be subjected to sampling.

3. Select an audit sampling technique. The auditor may select either

the:

a. Valued weighted selection or probability proportional to size

sampling; or

b. Classical variables sampling.

involved in variables sampling?

Answer 14:

4. Determine the sample size (n). The auditor should consider

the factors that affect the sample size for substantive procedures.

5. Determine the method of selecting the sample. Usually,

random number or systematic sampling is used.

6. Perform the sampling plan. The auditor should perform

appropriate audit procedures to determine an audit value for

each sample size.

7. Evaluate the sample results. The auditor should project the

results of the sample to the population.

8. Document the sampling procedure. Each of the prior 7 steps

and the conclusions reached should be documented in the

working papers.

sample size for substantive tests of details?

Answer 15:

The following table presents the factors that affect sample size

for substantive tests of details and their effects on sample size.

VARIABLES SAMPLING (SUBSTANTIVE TESTS OF DETAILS)

SUMMARY OF RELATIONSHIPS OF FACTORS TO SAMPLE SIZE

Increase in

Assessed level of risks of

material misstatement

Used of other substantive

procedures directed at the

same financial statement

assertion

Required confidence level

Tolerable misstatement

Expected amount of

misstatement

Stratification

Number of sampling units

Increase

Decrease

Increase

Decrease

Increase

Decrease

Negligible effect

auditors assessment of risks of material misstatement

and the sample size for substantive tests of details.

Answer 16:

The higher the auditors assessment of the

risk of material misstatement, the lower the

level of detection risk that the auditor can

accept. Hence, the auditor should increase the

extent (sample size) of his substantive

procedures.

of other substantive procedures which are directed at

the same financial statement assertion and the sample

size for another substantive test of details.

Answer 17:

The more the auditor relies on other

substantive procedures (such as analytical

procedures) to reduce the detection risk to an

acceptable level, the less assurance the auditor

will require from sampling and, therefore, the

sample size can be reduced.

between the auditors required confidence

level and the sample size for substantive

tests of details.

Answer 18:

The greater the degree of confidence that

the auditor requires that the results of the

sample are in face indicative of the actual

amount of misstatement in the population, the

larger the sample size needs to be.

relationship between the tolerable

misstatement and the sample size for

substantive tests of details.

Answer 19:

Tolerable misstatement refers to a monetary

amount set by the auditor in respect of which the

auditor seeks to obtain an appropriate level of

assurance that the monetary amount set by the

auditor is not exceeded by the actual

misstatement in the population. The lower the

tolerable misstatement, the larger the sample

size for substantive tests of details need to be.

relationship between the expected

amount of misstatement and the

sample size for substantive test of

details.

Answer 20:

The expected amount of misstatement is the

amount of misstatement the auditor expects to

find in the population. The greater the expected

amount of misstatement, the larger the sample

size needs to be in order to make a reasonable

estimate of the actual amount of error in the

population.

stratification on the sample size for substantive

tests of details.

Answer 21:

When there is variability in the monetary size

of items in the population, it may be

appropriate to stratify the population. When a

population can be stratified, the aggregate of

the sample sizes from the strata generally will

be less than the sample size that would have

been required had one sample been drawn from

the whole population.

relationship between the number of

sampling units in the population and

the sample size for substantive test

of details.

Answer 22:

For large populations, the actual size of the

population has little, if any, effect on sample

size. However, when using monetary unit

sampling, an increase in the monetary value of

the population increases sample size.

evaluating sample results for substantive tests

of details.

Answer 23:

For substantive procedures, the auditor should

project monetary errors found in the sample to the

population, and should consider the effect of the

projected error on the particular test objective and on

the other areas of the audit. The auditor projects the

total error for the population to obtain a broad view of

the scale of errors, and to compare this to the tolerable

error. For substantive procedures, the tolerable

misstatement will be an amount less than or equal to

the auditors preliminary estimates of materiality used

for the individual account balances being audited.

sample results for substantive tests of details.

Answer 23:

When an error has been established as an anomaly, it may be

excluded when projecting sample errors to the population. The effect of

any such error, if uncorrected, still needs to be considered in addition to

the projection of the non-anomalous errors. If an account balance or

class of transactions has been divided into strata, the error is projected

for each stratum separately. Projected error plus anomalous errors for

each stratum are then combined when considering the possible effect

of errors on the total account balance or class of transactions.

If the total amount of projected error plus anomalous error is less

than but close to that which the auditor deems tolerable, the auditor:

a. Consider the persuasiveness of the sample results in the light of

other audit procedures.

b. May consider it appreciate to obtain additional audit evidence.

evaluating sample results for substantive tests

of details.

The total projected error plus anomalous error is the auditors

best estimate of error in the population.

However, sampling results are affected by sampling risk.

Thus when the best estimate of error is close to the tolerable

error, the auditor recognizes the risk that a different sample

would result in a different best estimate that could exceed the

tolerable error. Considering the results of other audit procedures

helps the auditor to assess this risk, while the risk is reduced if

additional audit evidence is obtained.

Qualitative factors should also be considered. For instance, if

fraud has been discovered, a simple projection of them will not

in general be sufficient as an auditor will need to obtain a

thorough understanding of their causes and their likely effects

on the financial statements.

techniques used in variable sampling?

Answer 24:

Variable sampling may use either:

a. Value-weighted selection approach; or

b. Classical sampling techniques

Difference estimation

Ratio Estimation

Mean-Per-Unit (MPU) estimation

approach.

Answer 25:

Value weighted selection identifies the sampling unit as the individual monetary

units that make up the population. This approach to defining the sampling unit

ensures that audit effort is directed to the larger value items because they have a

greater chance of selection, and can result in smaller sample sizes.

A common type of value weighted selection approach is the monetary or peso

unit sampling. Monetary unit sampling views the population, not as a population of

accounts of different sizes, but as population of monetary units. The size of the

population is taken to be the total number of monetary units in all the accounts and

each monetary unit is selected with equal probability. Simply stated, each peso in

the population has an equal chance of being selected, but the likelihood of selecting

any one logical unit for testing is directly proportional to its size, thus monetary unit

sampling is also known as probability-probability-to-size sampling or PPS sampling.

Monetary unit sampling is most often used when one or a few population errors

are expected but it is more appropriate when no errors are expected. This method is

more likely to detect overstatements (normally for assets and income) rather than

understatements.

variables sampling approach.

Answer 26:

When using classical variables sampling, auditors treat

each individual item in the population as a sampling unit. It

uses normal distribution theory to evaluate audit samples.

This method is appropriate when the auditors objective is to

estimate the true but unknown monetary balance.

The three common types of classical variables sampling are:

a. Ratio estimation

b. Difference estimation

c. Mean-per-unit (MPU) sampling

the ratio estimation technique?

Answer 27:

Ratio estimation is a classical variables sampling technique that

uses the ratio of audited amounts to recorded amounts in the

sample to estimate the total peso amount of the population and

an allowance for sampling risk. Ratio estimation is most

appropriate when the size of misstatements is directly

proportional to the book values of the items.

Ratio estimation involves the following steps:

a. Determining the audited values for each sample item.

b. Calculating the ratio between the sum of sample audited

values and sample book values.

c. Determining the estimated population value by multiplying

the total population book value by the ratio computed.

understand by the difference

estimation technique?

Answer 28:

Difference estimation is a classical variables sampling technique that uses

the average difference between audited amounts and individual recorded

amounts to estimate the total audited amount of a population and an

allowance for sampling risk. Difference estimation is a most appropriate

when the size of the misstatements does not vary significantly in comparison

to book value.

Difference estimation involves the following steps:

a. Determining the audited values for each sample item.

b. Calculating the difference between the audited value and book value for

each sample item.

c. Calculating the average difference

d. Determining the estimated population value by multiplying the average

difference by the total population units and adding or subtracting this value

from the recorded book value.

the mean-per-unit (MPU) technique?

Answer 29:

Mean-per-unit (MPU) estimation is a classical variables sampling

technique that projects the sample average (mean) to the total

population by multiplying the sample average by the number of items

in the population. MPU estimation is appropriate when the underlying

documents that support the account balance are not accessible. For

instance, the statement of financial position shows a total for accounts

receivable, but the individual invoices supporting the balance are not

available.

MPU estimation involves the following steps:

a. Determining the audited values for each sample item

b. Calculating the average audited amount.

c. Multiplying this average audited amount by the number of units in

the population to obtain the estimation population value.

between ratio estimation and

difference estimation technique?

Answer 30:

Both the difference and ratio estimation

techniques can only be used under the following

instances:

a. Each population item must have a recorded

bool value.

b. Total population book value must be known

and must correspond to the sum of all individual

population items.

c. Differences between audited and recorded

book values are frequent.

pertains to an entitys account receivable.

Sample

Population

Number of accounts

100

10,000

Book values

P 1,000

P 120,000

Audited Values

P 1,200

and the projected misstatement using (a) ration estimation, (b)

difference estimation, and (c) mean-per-unit estimation techniques.

Answer 31:

advantages and disadvantages of

value weighted selection (PPS

sampling) over classical variables

sampling?

Answer 32:

Value weighted selection or PPS sampling has the following advantages:

a. It is generally easier to use.

b. It results in a stratified sampling, that is, the probability of selection of

an item is directly proportional to the size or value of the item.

c. It requires smaller samples if only few or no misstatements are

expected.

On the other hand, the use of such method has the following

disadvantages:

a. It requires more samples if many differences between the book and

audited values are expected.

b. It requires special sample design considerations when zero and

negative balances are selected.

disadvantages and disadvantages of

classical variables sampling over

value weighted-selection (PPS

sampling)?

Answer 33:

Classical variables sampling has the following advantages:

a. It requires smaller samples if many differences between

the book and audited values are expected.

b. It does not require special sample design considerations

when zero and negative balances are selected.

On the other hand, the use of such method has the following

disadvantages:

a. It is generally considered more complex than value

weighted selection.

b. The population standard deviation must be computed in

determining sample size.