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“Audit Sampling” (Sampling) involves the application of audit procedures to less than 100% of items within a class of transaction and account balance such that all sampling units have a chance of selection.
Risk Considerations In Obtaining Audit Evidence
In obtaining audit evidence, we will use professional judgment to access the risk of material misstatement (which includes inherent and control risk) and design further audit procedures to ensure this risk is reduced to an acceptably low level.
Selecting Items For Testing To Gather Audit Evidence
When designing audit procedures, we will determine appropriate means of selecting items for testing. The means available to us are:
(a) Selecting all items
(b) Selecting specific items; and
(c) Audit sampling
Selecting All Items
- We may decide that it will be most appropriate to examine the entire population of items that make up a class of transactions or account balance (or a stratum within that population). 100% examination is unlikely in the case of test of controls; however, it is more common for test of details.
Selecting Specific Items
- We may decide to select specific items from a population based on such factors as our understanding of the entity, the assessed risk of material misstatement, and the characteristics of the population being tested. The judgmental selection of specific items is subject to non-sampling risk. Specific items selected may include:
- All items over a certain amount. We may decide to examine items whose value exceeds a certain amount so as to verify a large proportion of the total amount of class of transactions or account balance.
- Items to test control activities. We may use judgment to select and examine specific items to determine whether or not a particular control activity is being performed.
Sample Selection Method
- Haphazard selection, in which we select the sample without following a structured technique. Although no structured technique is used, we will not avoid any conscious bias or predictability ( For example avoiding difficult to locate items, or always choosing or avoiding the fast or last entries on a page) and thus attempt to ensure that all items in the population have a chance of selection. Haphazard selection is not appropriate when using statistical sampling.
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