bea2004 slides unit 5 audit sampling

Audit samplingTesting all of the transactions entered into by an audit client would clearly be both impractical and uneconomic –consequently auditors have always had recourse to sampling in the course of gathering sufficient and appropriate audit evidence to support their audit opinionAudit samplingIt may be that in the nineteenth century auditors were able to test a higher proportion of transactions than they do today – but even then there was reference (in London and General Bank) to the choice for testing of ‘a few cases haphazard, see that they are right, and assume that others like them are correct also’1Audit samplingSampling techniques may be applied when testing control systems (compliance testing) - normally in terms of attribute sampling designed to test the likely error rate in the population: or when testing actual transactions/financial statement balances (substantive testing) – when forms of estimation sampling (or MUS as described below) may be usedAudit samplingThe relevant ISA (ISA UK & I 530) distinguishes between ‘statistical’ and ‘non-statistical’ samplingStatistical sampling means any approach to sampling which has the following characteristics:2Audit samplinga) Random selection of a sampleb) Use of probability theory to evaluate the results including measurement of sampling riskAny sampling approach which does not have these characteristics is considered to be non-statistical samplingAudit samplingNote ...