AUDIT SAMPLING

PROBABILITY-PROPORTIONAL-TO-SIZE
(PPS) SAMPLING

Amoroso || Durante
 PROBABILITY-PROPORTIONAL-TO-SIZE
(PPS) SAMPLING

also known as monetary/dollar-unit

sampling
is a technique where the sampling unit

WHAT IS PPS?
is defined as an individual dollar in a
population.
is used to determine if the account
balances or monetary amounts in a
population contain any misstatements.

Note: The larger the transaction, the more

likely the transaction will be included in
the sample.
 ADVANTAGES DISADVANTAGES

special considerations are

easier to use
required to handle
no estimate of the standard
understated accounts and
deviation of the population is
negative balances
needed
each item in the population
automatically stratifies the
must have a book value
population
might overstate the allowance
generally result in a smaller
for sampling risk (when
sample size (when there is
misstatements are found)
few misstatements)
sample size may exceed that
sample selection can begin
of the classical techniques (for
before the entire population
accounts with moderate
is available
number of misstatements)
 Steps:

SAMPLE SIZE SAMPLE SELECTION

SAMPLE INTERVAL SAMPLE EVALUATION

EXAMPLE - PROBLEM
Assuming that the population is P500,000 and the auditor
decided on a tolerable misstatement for the account is P35,000
and a 5% risk of incorrect acceptance. Additionally, assume that
based on prior audits, the auditor expect P12,500 of
misstatement in the population.
EXAMPLE - SAMPLE SIZE
SAMPLE SIZE = Population (book value) x Reliability factor

Tolerable misstatement - (Expected misstatement x Expansion factor)

EXAMPLE - SAMPLE SIZE
SAMPLE SIZE = Population (book value) x Reliability factor

Tolerable misstatement - (Expected misstatement x Expansion factor)

SAMPLE SIZE = P500,000 x 3.00

P35,000 - (P12,500 x 1.6)

= 100
EXAMPLE - SAMPLE INTERVAL
Population (book value)
SAMPLE INTERVAL =
Sample size

P500,000
SAMPLE INTERVAL =
100

= P5,000
EXAMPLE - SAMPLE SELECTION
EXAMPLE - EVALUATION
EXAMPLE - EVALUATION
 AUDIT SAMPLING

THANK YOU!
AMOROSO || DURANTE