3 Determine sample size using the following inputs Determine the desired

3 determine sample size using the following inputs

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3. Determine sample size, using the following inputs. Determine the desired confidence level. Determine the tolerable deviation rate. Determine the expected population deviation rate. Determine the population size (if < 500). 4. Select sample items. 5. Perform the audit procedures—understand and analyze any deviations observed. 6. Calculate the sample deviation and computed upper deviation rates. 7. Draw final conclusions. b. The advantages of using a statistical sampling methodology are that it helps the auditor (1) design an efficient sample, (2) measure the sufficiency of the evidence obtained, and (3) quantify sampling risk. By using a statistical sampling methodology, the auditor can limit sampling risk to an acceptable level. 8-5
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Chapter 08 - Audit Sampling: An Overview and Application to Tests Of Controls 8-25 The sample size for each control procedure is: Parameters Control Procedure 1 2 3 4 Risk of incorrect acceptance 5% 5% 10% 10% Tolerable deviation rate 4% 5% 7% 8% Expected population deviation rate 1% 2% 3% 4% Sample size (using tables) 156 181 94 98 Sample size (using ACL) 158 184 96 100 8-26 The computed upper deviation rate and the auditor’s decision for each control procedure are: Results Using Tables Control Procedure 1 2 3 4 Number of deviations 0 5 4 3 Sample size 156 181 94 98 Sample deviation rate 0.0 2.8 4.3 3.1 Computed upper deviation rate 2.0 6.9 8.7 7.3 Auditor’s decision Supports Does not support Does not support Supports Results Using ACL Control Procedure 1 2 3 4 Number of deviations 0 5 4 3 Sample size 158 184 96 100 Sample deviation rate 0.0 2.7 4.2 3.0 Computed upper deviation rate 1.9 5.7 8.3 6.7 Auditor’s decision Supports Does not support Does not support Supports 8-6
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Chapter 08 - Audit Sampling: An Overview and Application to Tests Of Controls 8-27 The sample size for each control procedure is: Parameters Control Procedure 1 2 3 4 Risk of incorrect acceptance 5% 5% 10% 10% Tolerable deviation rate 6% 7% 4% 3% Expected population deviation rate 2% 2% 1% 0% Sample size using tables 127 88 96 76 Sample size using ACL 130 90 98 77 8-28 The computed upper deviation rate and the auditor’s decision for each control procedure are: Results using Tables Control Procedure 1 2 3 4 Number of deviations 4 2 2 0 Sample size 127 88 96 76 Sample deviation rate 3.1 2.3 2.1 0.0 Computed upper deviation rate 7.2 7.7* 5.9 3.3* Auditor’s decision Does not support Does Support Does not support Does Support * It appears that the computed upper deviation rate exceeds the tolerable deviation rate for both procedure 2 and 4. However, these results are obtained because the evaluation tables do not include evaluations for sample sizes of 88 and 76, and when rounded down to sample sizes of 80 and 70, respectively, the computed upper deviation rate of 7.7% and 3.3% exceed the tolerable deviation rate. In reality, because a statistically derived sample size was determined in problem 8-27 and because the allowed number of deviations was found (see the number in parentheses in tables 8-5 and 8-6), the auditor is guaranteed that the results are acceptable. Note that when using ACL, rounding is not a potential source for auditor error.
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