Chap008-LN

Chap008-LN - Chapter 08: Audit Sampling: Tests of Controls...

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CHAPTER 8 Audit Sampling: Tests of Controls After studying this chapter, you should be able to: 1. Describe what audit sampling is and its use for tests of controls. 2. Understand sampling risk and nonsampling risk. 3. Explain the difference between statistical and nonstatistical sampling. 4. Understand the use of sampling for gathering evidence regarding the effectiveness of internal controls, the use of dual-purpose tests, and the evaluation of sample errors. 5. Explain how the auditor develops an audit sampling plan to perform a test of controls. 6. Describe how sequential sampling could be used for tests of controls. 7. Explain how statistical sampling tables could be used to determine sample sizes for nonstatistical samples. 8. Describe an alternative method for calculating sample size based on the frequency of the control. Chapter 8: Audit Sampling: Tests of Controls Chapter Highlights This chapter is the first of two chapters that present the topic of audit sampling and this one focuses on tests of controls . It begins with discussions describing audit sampling, sampling risk and the difference between statistical and nonstatistical sampling. The chapter then examines how sampling can be used to gather evidence regarding the effectiveness of internal controls, including the use of dual-purpose tests. Once the definitions have been reviewed, the chapter introduces a 10-step Sampling Plan for the Tests of Controls (Exhibit 8-3) which illustrates logical, easy-to-follow procedures to perform statistical tests of controls. The chapter concludes with an example utilizing the 10-step Sampling Plan. Exhibit 8-5 provides information for the continuing BCS Example which is used to illustrate the statistical tests of controls. In addition, Exhibits 8-6 and 8-7 are Tables for determining sample sizes for the statistical tests. Chapter Outline 1. Audit Sampling for Tests of Controls (Slide #1… see companion slides) Audit sampling is the selection and evaluation of a sample of items from a population so that the auditor expects the sample to be representative of the population. When a sample is representative, it is likely to provide a reasonable basis for making conclusions about the population. Sample-items selected for examination Population-all items in the account balance or class of transactions Random sample-each item in the population has an equal chance of being selected and ensures that the sample is representative of the population The evidence from the sample is used to arrive at a conclusion about the population Internal control tests are designed to provide information about the effectiveness of a control. (Slide #2)
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Chap008-LN - Chapter 08: Audit Sampling: Tests of Controls...

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