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Audit Sampling

In: Business and Management

Submitted By jnamri
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Audit sampling is necessary and helps improve an audit engagement because examining all items are rather very timely, requires more effort, and of course, at higher cost. Audit risks such as inherent, control and detection risk are first assessed when doing audit sampling. Low control risk means auditors rely extensively on the entity's internal control, and vice versa. The process for determining risks and gathering evidences to provide reasonable assurance are done through other audit procedures such as tests of controls and tests of details. These procedures are done by sampling. Using sampling, when auditors do not obtain sufficient and appropriate evidences, there is a risk of not identifying material errors and therefore result in a wrong conclusion. The use of either non-statistical sampling techniques or statistical ones does not directly affect application of audit procedures, appropriateness of audit evidences or courses of actions that could be taken. Even though the procedures in non-statistical sampling is less formal, they are still rigorous. Non-statistical sampling method involves eight steps namely establish objective test, defining the population, determining distortions, determining the appropriate sample size, determination of the right method for the sample selection, proper testing of the selected sample, extrapolating results, risk assessment.

Firms include in their policies the techniques which they use to implement auditing procedures. One of the sampling techniques is attribute sampling. It is a statistical technique used to test a population on certain characteristics and to determine whether accounting controls are operating effectively. A relevant sequence on how to do attribute sampling is provided as follows: Determine the Test Objectives and Attributes, Determine Deviations Conditions, Define the Population to be...

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