b Explain tests of controls and attribute sampling c Describe substantive

B explain tests of controls and attribute sampling c

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b) Explain tests of controls and attribute sampling. c) Describe substantive procedures and variable sampling. Below are some extracts picked up from the ACCA study guide of 1998: Whatever type of test is chosen, the auditors need to decide how they will select the items to be tested from the whole population. This is not as simple as it sounds. The auditor will want to select a sample which reflects, as closely as possible, the characteristics of the population from which the sample has been selected. If this is not the case, then the auditors cannot draw valid conclusions from the tests carried out on the sample. Practical sampling methods range from the very simple to the complex. The more sophisticated sampling techniques involve the use of probabilities and statistics. When studying this unit you should particularly note how sample sizes are determined, methods of sample selection and the advantages and disadvantages of statistical sampling. You should also remember that sampling is only one type of audit test, and other tests, for example testing all high-value items, may be more appropriate in certain circumstances. 44
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Purpose of SAS 430 The purpose is to set standards and provide guidance on the design and selection of an audit sample and the evaluation of the sample results. This SAS applies equally to both statistical and non-statistical sampling methods. It applies to any audit using sampling whether related to financial statements or not. Nothing contained in this statement is intended to preclude non- statistically based samples where there are reasonable grounds for believing that the results may be relied on for the purpose of the test. SAS 430.1 When using either statistical or non-statistical sampling methods, auditors should design and select audit samples that will enable them to obtain appropriate audit evidence. This SAS is based on the premise that auditors do not normally examine all the information available to them; it would be impractical to do so and using audit sampling will produce valid conclusions. KEY TERMS Audit sampling is the application of audit procedures to less than 100% of the items within an account balance or class of transactions to enable auditors to obtain and evaluate evidence about some characteristic of the items selected in order to form or assist in forming a conclusion concerning the population which makes up that account balance or class of transaction. Sampling units are the individual items that make up the population. Error is an unintentional mistake in the financial statements. Tolerate error is the maximum error in the population that the auditors are willing to accept and still conclude that the audit objective has been achieved. Sampling risk is the risk that the auditor’s conclusion, based on a sample, may be different from the conclusion that would be reached if the entire population was subject to the same audit procedure.
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