module04 - Module 4: Audit sampling Overview Module 4...

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Module 4: Audit sampling Overview Module 4 covers the use of sampling techniques in conducting tests of controls, dual-purpose testing, and substantive testing. It explains how to determine when sampling is appropriate, under what circumstances statistical or non-statistical approaches should be used, and the risks associated with sampling. You gain a working knowledge of the two most common statistical sampling techniques used in practice, and look at how to develop sampling plans, execute tests, and interpret test results. You learn some advantages and limitations of sampling, the aggregation of misstatements, and some alternative statistical sampling techniques. Planning the sample testing approach and interpreting the test results are critical processes in ensuring that audit risk is controlled. The effective application of sampling depends on sound audit judgment, and is subject to pitfalls for the novice auditor. Advanced computerized tools allow for efficient testing of entire populations for arithmetic accuracy, matching, sequence checking, and so on, where testing can be automated; however, there are still many cases where statistical sampling techniques help auditors efficiently conclude on specific audit objectives. Sampling fits into the audit steps of performing tests of controls and performing substantive tests (see Exhibit 1, Reading 1-7). In a GAAS audit, once you have obtained an understanding of the entity and its environment, made a preliminary assessment of the risk of material misstatement, and decided to use a combined approach, you can use sampling to perform tests of controls to fulfil the second examination standard of GAAS. Whether you are using a combined approach or performing a completely substantive audit, you could use sampling to perform substantive tests to fulfil the third examination standard of GAAS. (See paragraph 5100.02 of the CICA Handbook (CAS 200) for a refresher on the examination standards.) After completing this module, you will know about sampling concepts and methods, and how to apply them. You will be able to develop appropriate assurance procedures and execute the assurance program in accordance with professional standards, and analyze and document the evidence and results of the assurance engagement. You will know how to apply professional judgment to situations that arise in the planning and implementation of audit sampling. Test your knowledge Begin your work on this module with a set of test-your-knowledge questions designed to help you gauge the depth of study required. Learning objectives 4.1 Evaluate the risks involved in audit sampling, distinguish between statistical and non-statistical sampling, and discuss when it is appropriate to use each. (Level 1) AU2 - Module 4 Page 1
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4.2 Determine the underlying concepts of attribute sampling and how to plan and document an application used in testing the effectiveness of controls in a financial statement audit. (Levels 1 and 2) 4.3 Develop an attribute sampling plan and evaluate the results, explaining
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module04 - Module 4: Audit sampling Overview Module 4...

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