Sampling (SIA-5)

152 Page Views
Sampling (SIA-5)
  • Object: The internal auditor should design and select an audit sample, perform audit procedures thereon, and evaluate sample results so as to provide sufficient appropriate audit evidence to meet the objectives of the internal audit engagement unless otherwise specified by the client.
  • Definitions:
    • Audit sampling: means the application of audit procedures to less than 100% of the items within an account balance or class of transactions to enable the internal auditor to obtain and evaluate audit evidence.
    • Error: means either control deviations when performing tests of controls, or misstatements, when performing tests of details.
    • Population: means the entire set of data from which the sample is selected.
    • Sampling risk: means the risk that from the possibility that the internal auditor’s conclusions, based on examination of a sample may be different from the conclusion reached if the entire population was subjected to the same types of internal audit procedure
    • Sampling unit: means the individual items or units constituting a population
    • Statistical sampling: means Random selection of a sample; and use of theory of probability
    • Tolerable error: means the maximum error in a population that the internal auditor is willing to accept.
  • Use of sampling in Risk Assessment and tests of control:
    • To obtain an understanding of the entity, business and its environment, and its  internal control.
    • Sampling of tests of controls is appropriate when application of the control leaves audit evidence of performance
    • Risk can be reduced by increasing sample size for both tests of controls and tests of details.
  • Design of the Sample: The sample should be designed considering the specific audit objectives, the population from which the auditor wishes to sample, and the sample size
    • Sample Size
      • Should be determined considering sampling risk, the tolerable error, and the expected error.
      • Lower the risk, greater the sample size.
    • Statistical and Non-Statistical Approaches
      • Decision of using either statistical or non-statistical sampling is a matter of the internal auditor’s professional judgment.
      • When applying statistical sampling, sample size may be ascertained using either probability theory or professional judgment.

 

  • Selection of Sample
    • It should be selected in such a way that the sample can be expected to be representative of the population.
    • Commonly used sampling methods are:
    • Random selection and use of CAAT’s
    • Systematic Selection
    • Haphazard Selection
  • Evaluation of Sample Results: The auditor should:
    • Analyse the nature and cause of any errors detected in the sample.
    • Project the errors found in the sample to the population.
    • Reassess the sampling risk.
    • Consider their possible effect on the particular internal audit objective.
    • Evaluate the sample results to determine if the assessment of the relevant characteristics of the population is confirmed or not.
  • Documentation:
    • Relationship between the design of the sample and specific audit objectives.
    • Assessment of the expected rate of error in the population to be tested.
    • Assessment of the sampling risk and the tolerable error
    • Assessment of the nature and cause of errors.
    • Rationale for using a particular sampling technique and results thereof.
    • Analysis of the nature an cause of any errors detected in the sample.
    • Projection of the errors found in the sample to the population
    • Reassessment of sampling risk, where appropriate
    • Effect of the sample results on the internal audit’s objective.

©2018 TaxGuruPRO

or

Log in with your credentials

or    

Forgot your details?

or

Create Account