DETERMINING

THE EXTENT OF
TESTING
 Le
• Enumerate the means of selecting

ar
items as the extent of testing

ni
ng
• Discuss when the auditor should test

Ob
all items
• Discuss when it is appropriate to test

j ec
specific items

tiv
• Discuss the concept of audit sampling

es
• Explain the importance of a
representative sample
• Articulate the 10-step audit
sampling
TEST OF CONTROLS TEST OF DETAILS
1 (TOC) (TOD)

EXTENT AND SELECTION

1. ALL ITEMS (100%)
2. SPECIFIC ITEMS (NON-
REPRESENTATIVE)
3. AUDIT SAMPLING
(REPRESENTATIVE)

SUFFICIENT APPROPRIATE
AUDIT EVIDENCE
 EXTENT AND MEANS ARE ALL DOES THE AUDITOR
OF ITEMS SELECTION ITEMS TESTED? CONCLUDE FOR ALL
ITEMS?
All Items (100%) YES YES

Specific Items (non- NO NO

representative)

Audit Sampling NO YES

(representative)
 TESTING ALL ITEMS (100 %)
It is common for TOD such as when:

1. The population constitutes a small

number of large value items
2. There is a significant risk and other
means do not provide sufficient
appropriate AE
3. The use of computer-assisted audit
techniques (CAATS)
TESTING SPECIFIC NON-REPRESENTATIVE ITEMS
This includes:

1. High value or key items

2. All items over a certain amount
3. Items to obtain information
4. Items to test the operation of certain
control activities
 AUDIT SAMPLING (Representative )
Auditor usually performs AS, which is the
application of AP to:

• less than 100 % of items

• all sampling units have a chance of
selection
• in order to provide auditor with a
reasonable basis
 SAMPLING RISK
-risk that the auditor's conclusion based
on a sample may be different from the
conclusion if the entire population were
subjected to same AP.
a. Alpha Risk or Type I Misstatement-
affects audit efficiency
b. Beta Risk or Type II Misstatement-
affects effectiveness
 DEALING WITH SAMPLING
RISK
a) increase the size of sample
b) using appropriate sample selction
method
 NON-SAMPLING RISK
-risk that the auditor reaches an
erroneous conclusion for any reason not
related to sampling risk such as human
error due to:
• use of inappropriate AP
• failure to recognize misstatements or
deviations in the sample tested; and
• misinterpretation of evidence obtained
 DEALING WITH NON-
SAMPLING RISK
a) proper planning
b) adequate direction, review and
supervision of Audit Team
 THE 10-STEP AUDIT SAMPLING PROCESS

Step 1 Define the objective (purpose) of test

Step 2 Define the deviation or misstatement

Step 3 Identify the relevant population

Step 4 Determine the relevant sampling unit

Step 5 Select the appropriate sampling approach

 THE 10-STEP AUDIT SAMPLING PROCESS

Step 6 Determine the sufficient sampling approach

Step 7 Select the representative sample items

Step 8 Perform the testing and evaluate evidence

Step 9 Evaluate the test results and reach conclusion

Step 10 Complete documentation

THE END