lecture_10 4240

lecture_10 4240 - ACCT 4240: Auditing Introduction to Audit...

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ACCT 4240: Auditing Introduction to Audit Sampling
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Definitions Sampling is the examination of less than 100% of the population for the purpose of evaluation some aspect of the population Each item in the population is a population unit Each population unit selected for examination is a sampling unit
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Obtaining information about a lot from a little Used in everyday life Need to understand principles Use when they fit objectives Identify population (universe, field) Base opinions only on what is sampled Nothing in sampling is precise Confidence level Precision
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Inclusions and Exclusions A 100% audit does not involve sampling Analytical procedures normally are not applied to samples Procedures usually involved with sampling include Recalculation Physical observation of inventory Confirmations Document examination
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Projecting the Error in the Sample to the Population Book value of the population………… $1,500,000 Book value of the sample……………… $1,000,000 Dollar amount of error in the sample…… $10,000 Projected Error = $15,000 × 000 , 000 , 1 000 , 500 , 1 000 , 10 $
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Statistical Sampling Uses the laws of probability for selecting and evaluating the sample items Selected at random so each population unit has an equal chance of being selected Statistical calculations are used for selecting sample units and evaluating audit results Sample size determines the level of confidence in the results
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Nonstatistical Sampling Results are evaluated judgmentally rather than statistically Sample selection can be random or nonrandom Block sampling Select a group of items in sequence Sample may not be representative of the population Haphazard sampling - may introduce bias Judgmental sampling - sample size and items selected depends on auditor judgment
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Sample Selection: Random vs. Haphazard Selection Biased samples (nonstatistical): Purposeful Deliberate exclusions Patterns in population Statistical: Random sample selection Interval sampling Cluster sampling Stratified sampling Example When to stratify
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Sampling Risk and Non- Sampling Risk Sampling risk is the risk that the sample is not representative of the population Non-sampling risk results from human error Failure to recognize a mistake Use of an ineffective audit procedure Non-sampling risk is not quantifiable Level is reduced through Adequate supervision Quality control standards
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Techniques Sampling Technique Type of Test Purpose Attribute sampling Variables sampling Test of controls Substantive test To estimate the rate of deviations from prescribed controls in a population. To estimate the total dollar amount of a
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lecture_10 4240 - ACCT 4240: Auditing Introduction to Audit...

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