tailieunhanh - Lecture Auditing and assurance services (International edition) - Chapter 9: Audit sampling: An application to substantive tests of account balances

In this chapter, the learning objectives are: Understand the similarities and differences between audit sampling for tests of controls and substantive tests of details of account balances, learn to apply monetary-unit sampling, work through an extended example of monetary unit sampling. | Chapter Nine Audit Sampling: An Application to Substantive Tests of Account Balances Substantive Tests of Details of Account Balances The statistical concepts we discussed in the last chapter apply to this chapter as well. Three important determinants of sample size are Desired confidence level. Tolerable misstatement (error). Estimated misstatement (error). Misstatements discovered in the audit sample must be projected to the population, and there must be an allowance for sampling risk. Substantive Tests of Details of Account Balances Consider the following information about the inventory account balance of an audit client: The ratio of misstatement in the sample is 2% (€2,000 ÷ €100,000) Applying the ratio to the entire population produces a best estimate of misstatement of inventory of €60,000. (€3,000,000 × 2%) Book value of inventory account balance 3,000,000 € Book value of items sampled 100,000 € Audited value of items sampled 98,000 Total amount of overstatement observed in audit sample 2,000 € Book value of inventory account balance $ 3,000,000 Book value of intems sampled $ 100,000 Auditied value of items sampled 98,000 Total amount of overstatement observed in audit sample $ 2,000 Substantive Tests of Details of Account Balances The results of our audit test depend upon the tolerable error associated with the inventory account. If the tolerable error is €50,000, we cannot conclude that the account is fairly stated because our best estimate of the projected error is greater than the tolerable error. Monetary-Unit Sampling (MUS) MUS uses attribute-sampling theory to express a conclusion in monetary amounts (. in euros or other currency) rather than as a rate of occurrence. It is commonly used by auditors to test accounts such as accounts receivable, loans receivable, investment securities and inventory. Monetary-Unit Sampling (MUS) MUS uses attribute-sampling theory to estimate the percentage of monetary units in a population that might be misstated and | Chapter Nine Audit Sampling: An Application to Substantive Tests of Account Balances Substantive Tests of Details of Account Balances The statistical concepts we discussed in the last chapter apply to this chapter as well. Three important determinants of sample size are Desired confidence level. Tolerable misstatement (error). Estimated misstatement (error). Misstatements discovered in the audit sample must be projected to the population, and there must be an allowance for sampling risk. Substantive Tests of Details of Account Balances Consider the following information about the inventory account balance of an audit client: The ratio of misstatement in the sample is 2% (€2,000 ÷ €100,000) Applying the ratio to the entire population produces a best estimate of misstatement of inventory of €60,000. (€3,000,000 × 2%) Book value of inventory account balance 3,000,000 € Book value of items sampled 100,000 € Audited value of items sampled 98,000 Total amount of overstatement observed in .

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