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1 Chapter Table of TABLE OF CONTENTS ix Introduction The Development of Audit Sampling The Significance of Audit Sampling The Purpose of This Guide Audit Sampling Guidance for Compliance Audits Characteristics of Audit Sampling Audit Sampling Defined Procedures That May Not Involve Audit Sampling Inquiry and Observation Analytical Procedures Procedures Applied to Every Item in a Population Some Tests of Controls May Not Involve Audit Sampling Tests of Controls When Extrapolation Is Not Intended Procedures That Do Not Evaluate Characteristics Untested Balances Tests of Automated IT Controls Sampling and Nonsampling Audit Procedures Distinguished Terminology Used in This Guide Reliability or Confidence Level Sampling Risk Precision The Audit Sampling Process Purpose and Nature of Audit Sampling How Audit Sampling Differs From Sampling in Other Professions Evaluation of Audit Samples Types of Audit Tests Tests of Controls Substantive Procedures Dual-Purpose Tests Risk Sampling Risk Nonsampling Risk Nonstatistical and Statistical Sampling Planning the Audit Sampling Procedures Types of Statistical Sampling Plans Attributes Sampling Variables Sampling COPYRIGHTED MATERIAL
2 x Table of Chapter 2 The Audit Sampling Process continued Relating Balance Sheet and Income Statement Sampling General Implementation Considerations Continuing Professional Education Sampling Guidelines Use of Specialists Supervision and Review Nonstatistical and Statistical Audit Sampling in Tests of Controls Determining the Test Objectives Defining the Deviation Conditions Defining the Population Defining the Period Covered by the Test Initial Testing Estimating Population Characteristics Considering the Completeness of the Population Defining the Sampling Unit The Role of Walkthroughs Determining the Method of Selecting the Sample Simple Random Sampling Systematic Sampling Haphazard Sampling Block Sampling Determining the Sample Size Considering Sampling Risk in Assessing Controls Effectiveness Considering Other Evidence in Determining Risk of Concluding Controls Are More Effective Than They Actually Are (Overreliance) and Tolerable Rate of Deviation Considering the Risk of Concluding Controls Are More Effective Than They Actually Are (Overreliance) for Multiple Controls Addressing the Same Control Objective Determining the Tolerable Rate of Deviation Considering the Expected Population Deviation Rate Considering the Effect of Population Size Small Populations and Infrequently Operating Controls Considering a Sequential or a Fixed Sample Size Approach Developing Sample Size Guidelines Performing the Sampling Plan Voided Documents....67
3 Chapter Table of xi 3 Nonstatistical and Statistical Audit Sampling in Tests of Controls continued Unused or Inapplicable Documents Mistakes in Estimating Population Sequences Stopping the Test Before Completion Inability to Examine Selected Items Evaluating the Sample Results Calculating the Deviation Rate Considering Sampling Risk Considering the Qualitative Aspects of the Deviations Extending the Sample When Control Deviations Are Found Assessing the Potential Magnitude of a Control Deficiency Reaching an Overall Conclusion Documenting the Sampling Procedure Nonstatistical and Statistical Audit Sampling for Substantive Tests of Details Determining the Test Objectives Defining the Population Considering the Completeness of the Population Identifying Individually Significant Items Defining the Sampling Unit Choosing an Audit Sampling Technique Selecting the Sample Determining the Sample Size Considering Variation Within the Population Determining the Acceptable Level of Risk Considering Tolerable Misstatement Performance Materiality and Tolerable Misstatement Considering the Expected Amount of Misstatement Considering the Effect of Population Size Relating the Factors to Determine the Sample Size Performing the Sampling Plan Evaluating the Sample Results Projecting the Misstatement to the Population The Sufficiency of Sampling Evidence for Proposing Adjustments Negative Confirmations Interim Sample Results Considering Sampling Risk at the Test Level Misstatements Not Projected Documenting the Sampling Procedure
4 xii Table of Chapter 5 Nonstatistical Sampling Case Study Determining the Sample Size Evaluating the Sample Results Monetary Unit Sampling Selecting a Statistical Approach Advantages Disadvantages Defining the Sampling Unit Selecting the Sample Determining the Sample Size Formula Method No Misstatements Expected Formula Method Some Misstatements Expected Evaluating the Sample Results Sample Evaluation With 100 Percent Misstatements Sample Evaluation With Less Than 100 Percent Misstatements Quantitative Considerations Qualitative Considerations MUS Sampling Case Study Selecting the Sample Evaluating the Sample Results Classical Variables Sampling Selecting a Statistical Approach Advantages Disadvantages Types of Classical Variables Sampling Techniques Mean-Per-Unit Approach Difference Approach Ratio Approach Choosing a Classical Variables Sampling Approach The Ability to Design a Stratified Sample The Expected Number of Differences Between the Audited and Recorded Amounts Required Information Determining the Sample Size Considering Variation Within the Population Calculating the Sample Size Evaluating the Sample Results Classical Variables Sampling Case Study
5 Appendix Table of A Attributes Statistical Sampling Tables B Sequential Sampling for Tests of Controls C Monetary Unit Sampling Tables D Ratio of Desired Allowance for Sampling Risk of Incorrect Rejection to Tolerable Misstatement E Multilocation Sampling Considerations F Case Study Using Software to Plan and Evaluate a Classical Variables Sample G Glossary H Schedule of Changes Made to the Text From the Previous Edition Index of Pronouncements and Other Technical Guidance Subject Index xiii
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