AUDIT SAMPLING

Steps in an Attribute Sampling Plan

• Step 6: Perform the sampling plan

After the sample items have been selected, the auditor applies the planned audit
procedure to the sample.

The auditor sends confirmation letter to the customers selected to determine the

accuracy of the recorded account balances.

• Step 7: Evaluate and Document result

Once audit procedures have been performed on all sample items, the sample
results must be evaluated to determine whether sufficient evidence has been
obtained to satisfy the objective.

The auditor will have to summarize the customers ’ confirmation replies and decide
whether the account balance are materially misstated or whether additional audit
procedures need to be performed.

These includes:
a. Determining the sample deviation rate
Sample Deviation rate = Number of deviations observed
Sample size
b. Determining the maximum population deviation rate (achieved upper deviation limit)
and the allowance for sampling risk (achieved precision).
• The maximum deviation rate is based on the sample size and the number of
deviations discovered. There are standard tables that yield maximum
population deviation rates at specified risks of assessing control risk too low.

Attribute Sampling (Sampling Test of Controls)

COMMONLY USED ATTRIBUTE SAMPLING TECHNIQUES

Determination of Sample Size

1. Acceptable Sampling Risk- inherent in an audit sampling

Inverse relationship between sample sizes of test of controls “the smaller the sampling size the
auditor is willing to accept the larger the sample size to be”

2. Tolerable Deviation Rate- maximum rate if deviations the auditor is willing to accept without
modifying the planned degree of reliance on the internal control

“A decrease in the tolerable deviation rate will cause the sample size to increase ”

3. Expected Deviation Rate- rate of deviation the auditor expects to find in the population
before testing begins. The auditor can develop this expectation on the prior year ’s results or by
examining few items in the population(pilot sample).

The expected deviation rate has a direct effect on the sample size, “the larger the expected
population deviation rate, the larger would be the sample size.

Sample selection Method

1. Random Number Selection- the auditor selects the sample by matching random number,
generated by a random number table or a computer software generator, with the population
numbering system such as document number

2. Systematic Selection- involves determining a constant sampling interval and then selects the
sample based on the size of that interval.

The population items do not have to be pre-numbered

3. Haphazard Selection- the sample is selected without following an organized or structured

technique

Useful for non-statistical sampling, but it is not used for statistical sampling because the auditor
cannot measure the probability of an item being selected when using this method.

*VOIDED DOCUMENTS- the auditor may occasionally select a voided document or cancelled
document in a sample. If the document has been properly voided, such document should be
replaced by another sample.

*MISSING DOCUMENT- when the auditor encounters missing document and he is unable to
determine whether the control has been properly performed, such item should be treated as a
deviation.
Other Sampling Applications for Tests of Controls

1. Sequential Sampling (Stop-or-Go Sampling)- can be used as an alternative form of testing

controls when an auditor expects very few deviations within the population.

2. Discovery Sampling- it is most appropriate when no deviation are expected in the population
and therefore even one deviation would cause concern. This is normally used when the auditor
suspects that an irregularity might have been committed. The auditor determines a sample size
sufficient to discover at least one deviation to confirm whether an irregularity has occurred.

STEPS IN A VARIABLE SAMPLING PLAN

1. DEFINE THE OBJECTIVE OF THE TEST- The audit objective largely determines the audit
procedures to be applied. Hence, before deciding on the nature of the audit procedures
to be performed, the auditor must define the specific objective of the test.

2. DEFINE THE POPULATION

3. CHOOSE AN AUDIT SAMPLING APPROACH/TECHNIQUES

a. Statistical vs. Nonstatistical

b. Classical variables sampling vs. Probability proportional to size sampling

4. DETERMINE THE SAMPLE SIZE

The auditor consides the following:

Variation within the population

* Sample size varies in the same direction as the variation in population amounts. As
population variation increases, so doesthe sample size.

* An estimate of population variation is made by determining a population standard

deviation

•Acceptable risk of Incorrect rejection

•Acceptable risk of Incorrect acceptance

•Tolerable Error

5. DETERMINE THE METHOD OF SAMPLE SELECTION

 •Systematic selection

•Random number selection

•Haphazard selection

6. PERFORM THE SAMPLING PLAN

7. EVALUATE THE SAMPLE RESULTS

The following procedures are performed.

Projecting the same error to the population

•Considering sampling risk

•Considering qualitative information

•Reaching an overall conclusion.

8. DOCUMENT THE SAMPLING PLAN, THE PROCEDURES PERFORMED AND THE

CONCLUSIONS REACHED.

Steps in an Attribute Sampling Plan - Clemencio

COMMONLY USED ATTRIBUTE SAMPLING TECHNIQUES - Grantuza and Sayat

STEPS IN A VARIABLE SAMPLING PLAN - Austria and Lasam

Powerpoint - Clemencio

Word - Clemencio