tailieunhanh - Lecture Auditing and assurance services (International edition) - Chapter 8: Audit sampling: An overview and application to tests of controls

In this chapter, the learning objectives are: Learn the definition of audit sampling and why auditors use sampling to gather evidence, understand basic sampling terminology, learn the types of audit procedures that do and do not involve sampling, learn the types of audit sampling, learn the sampling requirements in auditing standards. | Chapter Eight Audit Sampling: An Overview and Application to Tests of Controls Introduction Auditing standards recognize and permit both statistical and non-statistical methods of audit sampling. Two technological advances have reduced the number of times auditors need to apply sampling techniques to gather audit evidence: 1 Development of well-controlled, automated accounting systems. 2 Advent of powerful PC audit software to download and examine client data. Introduction Technology will never eliminate the need for auditors to rely on sampling to some degree because: Many control processes require human involvement. Many testing procedures require the auditor to physically examine an asset. In many cases auditors are required to obtain and examine evidence from third parties. Definitions and Key Concepts On the following screens we will define: Audit Sampling Sampling Risk Confidence Level Tolerable and Expected Error Audit Sampling Audit sampling is 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. Sampling Risk Sampling risk is the element of uncertainty that enters into the auditor’s conclusions anytime sampling is used. There are two types of sampling risk. Risk of incorrect rejection (Type I) – in a test of internal controls, it is the risk that the sample supports a conclusion that the control is not operating effectively when, in fact, it is operating effectively. Risk of incorrect acceptance (Type II) – in a test of internal controls, it is the risk that the sample supports a conclusion that the control is operating effectively when, in fact, it is not operating effectively. Sampling Risk Three Important Factors in Determining Sample Size The desired level of assurance in the results (or confidence level), Acceptable defect rate (or tolerable error), and The historical defect rate (or estimated error). . | Chapter Eight Audit Sampling: An Overview and Application to Tests of Controls Introduction Auditing standards recognize and permit both statistical and non-statistical methods of audit sampling. Two technological advances have reduced the number of times auditors need to apply sampling techniques to gather audit evidence: 1 Development of well-controlled, automated accounting systems. 2 Advent of powerful PC audit software to download and examine client data. Introduction Technology will never eliminate the need for auditors to rely on sampling to some degree because: Many control processes require human involvement. Many testing procedures require the auditor to physically examine an asset. In many cases auditors are required to obtain and examine evidence from third parties. Definitions and Key Concepts On the following screens we will define: Audit Sampling Sampling Risk Confidence Level Tolerable and Expected Error Audit Sampling Audit sampling is the application of an audit .