Basic Concepts

PSA 530 states that when designing audit procedures,

auditor should determine appropriate means for selecting
items for testing so as to gather sufficient appropriate
audit evidence to meet the objectives of the audit
procedures.
Means for testing:
1. selecting all items (100% examination)
2. selecting specific items
3. Audit sampling
 Selecting All items Selecting specified items Audit Sampling
May include: sampling involves the
100% examination high value or key application of audit
is unlikely in the items procedures to less than
case of test of all items over a certain 100% of items within class
amount
controls, however of transactions or account
items to obatain
balance such that all
it is more common information
sampling units have
items to test control
for tests of details activities chance of selection
Enables auditor to obtain and evaluate audit evidence
about some characteristics of items selected in order to
form or assist in forming conclusion concerning
population from which sample is drawn.
Can use either statistical or non-satistical approach.

Sampling unit - individual items constituting population.

 TEST OF CONTROLS
> Attributes
- Designed whether entity is
complying with control
procedures prescribed
> Attribute sampling plan
- Test an entity’s rate of
occurrence
SUBSTANTIVE TEST
> Variable
- Designed whether
monetary errors
> Variable sampling plan
- Test whether recorded
account balance are fairly
stated.
 CONTROL RISK
Risk that errors could occur,
and could be material when
combined with errors in other
accounts, but will not be
prevented or detected by te
entity’’s internal control
structure.
INHERENT RISK
Susceptability of an account
balance to errors that, when
combined with errors in
other account, could be
material and that are not
monitored by related
control procedures.
 SAMPLING RISK
Uncertainties related to sampling
> test of controls
risk of under reliance
risk of over reliance
> substantive testing
risk of incorrect rejection
risk of incorrect acceptance
NON-SAMPLING RISK
Uncertainties arising
from factors unrelated
to sampling
risk consideration in
obtaining audit evidence
A. Random Number Sampling
B. Systematic Sampling
C. Block Selection (Cluster Sampling)
D. Haphazard Sampling
E. Monetary Unit Sampling
A. Random-Number Sampling B. Systematic Sampling
Random-number tables Selecting every nth
or computer-generated time from a
random numbers to
population of
select sampling units
from population sequentially
ordered items
C) Block selection (cluster sampling) D) Haphazard sampling
Selecting a group Consists of
of items arranged sampling units
contiguously selected without
within a larger special reasons,but
grouping of also without
sampling units conscious bias
 E). Monetary unit sampling

Type of value-weighted
selection in which sample size,
selection and evaluation
results in a conclusion in
monetary amounts
 SAMPLE DESIGN AND CHARACTERISTICS OF
INTEREST

Test of Control Substantive Testing

Characteristics:
Characteristics:
monetary amount
deviation or
of misstatement in
occurrence rate
account balance
 SAMPLE DESIGN AND CHARACTERISTICS OF
INTEREST

Population Stratification
It is important for the by dividing into
auditor to ensure that the discrete sub-population
population is appropriate which have identifying
and complete. characteristics
SAMPLE DESIGN AND CHARACTERISTICS OF
INTEREST

VALUE-WEIGHTED SELECTION
ordinarily used in conjunction
with the systematic method of
sample selection and is most
efficient when selecting items
using CAATS
 SAMPLE SIZE ON TEST OF CONTROLS

Factor Effect
An increase in the auditor‘s increase
intended reliance on accounting and
internal control systems
 SAMPLE SIZE ON TEST OF CONTROLS
Factor Effect
An increase in the rate of deviation
decrease
from the prescribed control procedure
that the auditor is willing to accept
(tolerable deviation rate)
 SAMPLE SIZE ON TEST OF CONTROLS

Factor Effect
An increase in the rate of deviation from
increase
the prescribed control procedure that the
auditor expect to find in the population
(Expected deviation rate)
 SAMPLE SIZE ON TEST OF CONTROLS

Factor Effect
An increase in the auditor‘s required confidence
level (or conversely, a decrease in the risk that
increase
the auditor will conclude that the control risk is
lower than the actual control risk in the
population -risk of assessing control risk too
low)
 SAMPLE SIZE ON TEST OF CONTROLS

Factor Effect
An increase in the number of sampling negligible
units in the population
 SAMPLING TECHNIQUES
Attribute Estimation Sequential Sampling Discovery Saampling
Sampling
auditor wants to
auditor most
project unkown expects very appropriate
population few when no
deviation rate to deviations deviations are
draw conclusions
within the expected within
on the effectiveness
of internal control population the population
 SAMPLE SIZE FOR SUBSTANTIVE TESTING

Factor Effect
An increase in the auditor’s increase
assessment of inherent risk
 SAMPLE SIZE FOR SUBSTANTIVE TESTING

Factor Effect
An increase in the auditor’s assessment increase
of control risk (or a decrease in reliance
on internal controls)
 SAMPLE SIZE FOR SUBSTANTIVE TESTING

Factor Effect
An increase in the use of other decrease
substantive procedures directed at the
same financial statement assertion
 SAMPLE SIZE FOR SUBSTANTIVE TESTING

Factor Effect
An increase in the auditor's increase
required confidence level
 SAMPLE SIZE FOR SUBSTANTIVE TESTING

Factor Effect
An increase in the total error that
decrease
the auditor is willing to accept
(tolerable error)
 SAMPLE SIZE FOR SUBSTANTIVE TESTING

Factor Effect
An increase in the amount of error
increase
the auditor expects to find in the
population (expected error)
 SAMPLE SIZE FOR SUBSTANTIVE TESTING

Factor Effect
Stratification of the population
decrease
when appropriate
 SAMPLE SIZE FOR SUBSTANTIVE TESTING

Factor Effect
The number of sampling units in the Negligible
population Effect
 THANK
YOU!
Annie A
b ando
Krizza
Anga-a
Nicole ngan
Balles
teros Devy G
arcia
Jemima
Medal
Shiela la
Valdez