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154 154 the effect on sample size of factors

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154154the effect on sample size of factors identified below will be similar regardless of whether statistical or non-statistical approach is chosen.Non-Sampling riskarises from factors that cause the auditor to reach an erroneous conclusion fro any reasonnot related to the size of the sample. For example, most audit evidence is persuasive rather than conclusive,the auditor might use inappropriate procedures, or the auditor might misinterpret evidence and fail to recognizean error.Design of the SampleWhen designing an audit sample, the auditor should consider the objectives of the test and the attributes of thepopulation from which the sample will be drawn. The auditor first considers specific objectives to be achievedand the combination of audit procedures which is likely to best achieve those objectives. Consideration of thenature of the audit evidence sought and possible error conditions or other characteristics relating to thatevidence will assist the auditor inn defining what constitutes an error and what population to use for sampling.The auditor considers what conditions constitute an error by reference to the objectives of the test. A clearunderstanding of what constitutes an error is important to ensure that all, and only those conditions thatrelevant to the test objectives are included in the projection of errors.When performing tests of control, the auditor generally makes a preliminary assessment of the arte of error theauditor expects to find in the population to be tested and the level of control risk. The assessment is based onthe auditor’s prior knowledge or the examination of a small number of items from the population. Similarly, forsubstantive tests, the auditor generally makes a preliminary assessment of the amount of error in thepopulation. These preliminary assessment are useful fro designing an audit sample and in determining samplesize. For example, if the expected rate of error id unacceptable high, test of control will normally not beperformed. However, when performing substantive procedures if the expected amount of error is high, 100%examination or the use or a large sample size may be appropriate.PopulationIt is important for the auditor to ensure that the population is;Appropriate to the objective of the sampling procedure, which will include consideration of the directionof testing. For example, if the auditor’s objective is to test for overstatement of accounts payable, thepopulation could be defined as the accounts payable listing. On the other hand, when testing forunderstatement of accounts payable the population is the subsequent disbursement, unpaid invoices,supplier’s statement, unmatched receiving reports or other populations that provide audit evidence ofunderstatement of accounts payable.

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Term
Summer
Professor
sumit ram
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