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Chapter 15 Instructor's Guide

# Chapter 15 Instructor's Guide - Chapter 15 Audit Sampling...

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Chapter 15 Audit Sampling for Tests of Controls and Substantive Tests of Transactions Both audit sampling chapters (Chapter 15 and 17) follow similar approaches to the topic. In response to suggestions from instructors and current trends in the use of sampling, nonstatistical sampling is covered early in each chapter, followed by a discussion of statistical sampling methods. Each chapter emphasizes the similarities between nonstatistical sampling and statistical sampling methods. We believe that the format of Chapter 15 will provide you with maximum flexibility in deciding how you wish to approach the topic of audit sampling for tests of controls and substantive tests of transactions. The chapter is built around the fourteen steps of audit sampling, which apply to both nonstatistical and attributes sampling. Each step is covered in detail during the discussion of nonstatistical sampling on pages 489-505. The discussion of attributes sampling on pages 506-512 uses these same fourteen steps, but focuses on the differences between how these steps are applied for nonstatistical and attributes sampling. Before assigning Chapter 15, you must decide how you want to approach the topic of audit sampling. There are two suggested approaches for covering Chapter 15: (1) Cover nonstatistical sampling only (2) Cover nonstatistical sampling, followed by attributes sampling Note that it is not feasible to cover attributes sampling only . You must cover the nonstatistical sampling portion of the chapter before discussing attributes sampling. This is because the attributes sampling portion of the chapter revolves around the fourteen steps outlined in the nonstatistical sampling section of the chapter. The remainder of this outline assumes that you will follow approach (2) above – cover nonstatistical sampling, followed by attributes sampling. If you wish to use approach (1) above – cover nonstatistical sampling only – simply ignore the last section of this outline – Attributes Sampling. The following are the primary topical areas that we suggest you cover: Chapter opening vignette Overview of audit sampling Representative samples Statistical versus nonstatistical sampling and probabilistic versus nonprobabilistic sample selection Nonprobabilistic sample selection methods Probabilistic sample selection methods, including random selection Sampling for exception rates Nonstatistical audit sampling Attributes sampling ( ignore this section if teaching nonstatistical sampling only ) 15-1

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Chapter Opening Vignette – “If You are Not Going to Believe It, Don’t Use It” An alternative title for this vignette would be: There is no such thing as an "isolated misstatement." A frequent occurrence in practice is for an auditor to find a misstatement in a sample item, to confront the client with it, and to be told it is unique and does not represent other similar items. It is easy to buy off on the client's argument, but very difficult to defend objectively. This vignette attempts to show this
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