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    This document provides guidance on audit sampling for internal auditors. It defines audit sampling and statistical and non-statistical sampling. It states that sampling is used when examining all items is impractical but valid conclusions can still be reached. The document provides guidance on determining sample size and methods, considering audit objectives, population characteristics, expected errors, and other factors. It describes random, systematic, and judgmental sampling methods and notes statistical methods allow conclusions on the full population while judgmental sampling does not.

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    This document provides guidance on audit sampling for internal auditors. It defines audit sampling and statistical and non-statistical sampling. It states that sampling is used when examining all items is impractical but valid conclusions can still be reached. The document provides guidance on determining sample size and methods, considering audit objectives, population characteristics, expected errors, and other factors. It describes random, systematic, and judgmental sampling methods and notes statistical methods allow conclusions on the full population while judgmental sampling does not.

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    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    44 views7 pages

    Audit Engagement Sampling

    Uploaded by

    On Lee Willy
    This document provides guidance on audit sampling for internal auditors. It defines audit sampling and statistical and non-statistical sampling. It states that sampling is used when examining all items is impractical but valid conclusions can still be reached. The document provides guidance on determining sample size and methods, considering audit objectives, population characteristics, expected errors, and other factors. It describes random, systematic, and judgmental sampling methods and notes statistical methods allow conclusions on the full population while judgmental sampling does not.

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    of 7

    CGIAR Centers Internal Audit Audit Manual Section I.

    3B

    SECTIONI.3BAUDITENGAGEMENTSAMPLING Introduction: In forming an audit opinion auditors frequently do not examine all of the information available as it may be impractical and valid conclusions can be reached using audit sampling. Sampling is one audit technique among others whichtheInternalAuditormaychooseinordertoobtainappropriateevidence tosupportauditconclusions.Wherethepopulationtobeexaminedissmall,it maybemorecosteffectivetotestallitemsratherthanonlyasample. Definitions: Audit sampling is defined as the application of audit procedures to less than 100% of the population to enable the auditor to evaluate audit evidence about somecharacteristicoftheitemsselectedtoformorassistinformingaconclusion concerningthepopulation. Statistical sampling involves the use of techniques from which mathematically constructedconclusionsregardingthepopulationcanbedrawn. Nonstatistical sampling is not statistically based and results should not be extrapolatedoverthepopulationasthesampleisunlikelytoberepresentativeof thepopulation.
    Ref. PolicyandPracticeRequirements IIAStandardsand OtherReferences

    I.3B1 Policy:Whendesigningauditprocedures,the InternalAuditorshalldetermineappropriate meansofselectingitemsfortesting.Themeans availabletotheInternalAuditorare: Selectingallitems(100%examination) Selectingspecificitems(judgmentsampling) Statisticalsampling Discussion: Thedecisionastowhichapproachtousewill dependonprofessionaljudgment.The

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    InternalAuditorneedstobesatisfiedthatthe methodsselectedareeffectiveinproviding appropriateevidencetosupportconclusions ontherelatedauditobjective. I.3B2 Policy:Whenusingstatisticalornonstatistical samplingmethodsaspartofassurance engagementprocedures,theInternalAuditor shalldesignandselectanauditsample,perform auditproceduresandevaluatesampleresultsto obtainsufficient,reliable,relevantanduseful auditevidence. I.3B 2:1 Practicerequirement: Whendesigningthesizeandstructureofanaudit sample,InternalAuditorsshallconsiderthe specificauditobjectives,thenatureofthe populationandthesamplingandselection methods.Theauditorshouldconsidertheneedto involveappropriatespecialistsinthedesignand analysisofsamples. Discussion: SamplingUnitThesamplingunitwilldepend onthepurposeofthesample.Forcompliance testingofcontrols,attributesamplingis typicallyused,wherethesamplingunitisan eventortransaction(e.g.,acontrolsuchasan authorizationonaninvoice).Forsubstantive testing,variableorestimationsamplingis frequentlyusedwherethesamplingunitis oftenmonetary. AuditobjectivesTheInternalAuditorshould considerthespecificauditobjectivestobe achievedandtheauditproceduresthatare mostlikelytoachievethoseobjectives.When auditsamplingisappropriate,consideration shouldbegiventothenatureoftheaudit evidencesoughtandpossibleerrorconditions. PopulationThepopulationistheentiresetof ISACAAuditand AssuranceGuidelineG10 AuditingSampling

    ISACAAuditand AssuranceGuidelineG10 AuditingSampling

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    datafromwhichtheauditorwishestosample inordertoreachaconclusiononthe population.Thereforethepopulationfrom whichthesampleisdrawnhastobe appropriateandverifiedascompleteforthe specificauditobjective. StratificationToassistintheefficientand effectivedesignofthesample,stratification maybeappropriate.Stratificationisthe processofdividingapopulationintosub populationswithsimilarcharacteristics explicitlydefinedsothateachsamplingunit canbelongtoonlyonestratum. SamplesizeWhendeterminingsamplesize,the InternalAuditorshouldconsiderthesampling risk,theamountoftheerrorthatwouldbe acceptableandtheextenttowhicherrorsare expected. SamplingriskSamplingriskarisesfromthe possibilitythattheInternalAuditors conclusionmaybedifferentfromthe conclusionthatwouldbereachediftheentire populationweresubjectedtothesameaudit procedure.Therearetwotypesofsampling risk: o Theriskofincorrectacceptancetherisk thatmaterialmisstatementisassessedas unlikely,wheninfactthepopulationis materiallymisstated Theriskofincorrectrejectiontheriskthat materialmisstatementisassessedaslikely, wheninfactthepopulationisnot materiallymisstated ThelevelofsamplingriskthattheInternal Auditoriswillingtoacceptaffectssample sizethelowerthesamplingriskdesired, thelargerthesamplewillneedtobe. Samplingriskshouldbeconsideredin relationtotheauditriskmodelandits components,inherentrisk,controlrisk,and

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    detectionrisk. TolerableerrorTolerableerroristhemaximum errorinthepopulationthatauditorsare willingtoacceptandstillconcludethatthe auditobjectivehasbeenachieved.For substantivetests,tolerableerrorisrelatedto theauditorsjudgmentaboutmateriality.In compliancetests,itisthemaximumrateof deviationfromaprescribedcontrolprocedure thattheauditoriswillingtoaccept. ExpectederrorIftheInternalAuditorexpects errorstobepresentinthepopulation,alarger samplethanwhennoerrorisexpected ordinarilyhastobeexaminedtoconcludethat theactualerrorinthepopulationisnotgreater thantheplannedtolerableerror.Smaller samplesizesarejustifiedwhenthepopulation isexpectedtobeerrorfree.Whendetermining theexpectederrorinapopulation,theauditor shouldconsidermattersaserrorlevels identifiedinpreviousaudits,changesinthe organization sproceduresandevidence availablefromaninternalcontrolevaluation andresultsfromanalyticalreviewprocedures. I.3B 2:2 Practicerequirement: TheInternalAuditorshallusearecognized samplingmethod,appropriatetotheaudit objectives,whenselectingsamples. Discussion: Therearethreecommonlyusedsampling methodswhichInternalAuditorsmayselect: StatisticalSamplingMethods o Randomsamplingensuresthatall combinationsofsamplingunitsinthe populationhaveanequalchanceof selection. Systematicsamplinginvolvesselecting ISACAAuditand AssuranceGuidelineG10 AuditingSampling

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    samplingunitsusingafixedinterval betweenselections,thefirstintervalhaving arandomstart.ExamplesincludeMonetary UnitSamplingorValueWeightedselection whereeachindividualmonetaryvalue (e.g.,$1)inthepopulationisgivenanequal chanceofselection.Astheindividual monetaryunitcannotordinarilybe examinedseparately,theitemwhich includesthatmonetaryunitisselectedfor examination.Thismethodsystematically weightstheselectioninfavorofthelarger amountsbutstillgiveseverymonetary valueanequalopportunityforselection. Anotherexampleincludesselectingevery nthunit. NonStatisticalSamplingMethod o Judgmentalsamplinginwhichtheauditor placesabiasonthesample(e.g.,all samplingunitsoveracertainvalue,allfora specifictypeofexception,allnegatives,all newusers,etc.).Itshouldbenotedthata judgmentalsampleisnotstatisticallybased andresultsshouldnotbeextrapolatedover thepopulationasthesampleisunlikelyto berepresentativeofthepopulation.

    Wheresamplingischosenbecauseofalarge populationorbecausetheInternalAuditor needstoshowtotheauditclientthattherewas nobiasinthesampleselection,astatistical samplingmethodispreferred.However judgmentsamplingcanbeanefficientwayof identifyingproblemsintheitemsbeingtested whentimeislimitedorthefocusison demonstratingtheexistenceofproblemsina population(e.g.controlweaknesses)whereitis notexpectedthattheauditwillalso definitivelydeterminetheextentofthe problemthisbeingreferredbackto managementtoinvestigate. Thereisafourthnonstatisticalmethod

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    Haphazardsamplinginwhichtheauditor selectsthesamplewithoutfollowinga structuredtechnique,howeveravoidingany consciousbiasorpredictability.Analysisofa haphazardsamplecannotberelieduponto formaconclusiononthepopulation. Judgmentalsamplingisthepreferrednon statisticalsamplingmethod. Atypeofhaphazardsamplingisblock selection(egselectingalltransactionsincertain months).Blockselectioncannotbereliedupon toformaconclusionontheoverallpopulation. I.3B 2:3 Practicerequirement: Tomaintainauditindependence,theInternal Auditorshallensuretheinformationonthe populationbeingsamplediscompleteandshould controltheselectionofthesample Discussion: Wherethesampleisselectedfromfinancial transactionsoveraperiod,theauditorneedsto establishthatthetotaltransactionsfromwhich thesampleisbeingdrawnarecomplete.Audit softwaremaybeusedtoextractpopulations fromfinancialsystemsseesectionI.3Con controllingthisprocess. I.3B 2:4 Practicerequirement: TheInternalAuditorshallobtainaclear understanding,beforetesting,ofwhatconditions constituteanerrorbyreferencetotheaudit objectivesoftheprocedure. Practicerequirement: Havingperformed,oneachsampleitem,those auditprocedureswhichareappropriatetothe particularauditobjective,theInternalAuditor shallanalyzeanypossibleerrorsdetectedinthe sampletodeterminewhethertheyareactually ISACAAuditand AssuranceGuidelineG10 AuditingSampling ISACAAuditand AssuranceGuidelineG10 AuditingSampling

    I.3B 2:5

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    errorsandifappropriatethenatureandcauseof theerrors.Forthosethatareassessedaserrors,if thesamplingmethodusedisstatisticallybased thentheerrorsshouldbeprojectedasappropriate tothepopulation. Discussion: Anypossibleerrorsdetectedshouldbe reviewedtodeterminewhethertheyare actuallyerrors.Theauditorshouldconsider thequalitativeaspectsoftheerrors.These includethenatureandcauseoftheerrorand thepossibleeffectoftheerrorontheother phasesoftheaudit.Errorsthataretheresultof thebreakdownofanautomatedprocess ordinarilyhavewiderimplicationsforerror ratesthanhumanerror. I.3B 2:6 Practicerequirement: TheInternalAuditorshallconsiderwhethererrors inthepopulationmightexceedthetolerableerror bycomparingtheprojectedpopulationerrortothe tolerableerror,takingintoaccounttheresultsof otherauditproceduresrelevanttotheaudit objective.Whentheprojectedpopulationerror exceedsthetolerableerror,theauditorshould reassessthesamplingriskandifthatriskis unacceptable,considerextendingtheaudit procedureorperformingalternativeaudit procedures. I.3B 2:7 Practicerequirement: Theauditworkingpapersshallincludesufficient detailtodescribeclearlythesamplingobjective andthesamplingprocessused.Theworking papersshouldincludethesourceofthe population,thesamplingmethodused,sampling parameters(e.g.,randomstartnumberormethod bywhichrandomstartwasobtained,sampling interval),itemsselected,detailsofaudittests performedandconclusionsreached. ISACAAuditand AssuranceGuidelineG10 AuditingSampling

    ISACAAuditand AssuranceGuidelineG10 AuditingSampling

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