Page 133 - CA Final PARAM Digital Book.

Part 5- SA 530

QNO Sampling Risk Old Course – (M06E, M10E, M12R, M12M, N13R, PM17)
74.000 TITANIUM CNO--SA530.020

Sampling Risk
OR

While planning the audit of S Ltd you want to apply sampling techniques What are the risk factors you
should keep in mind?
Part I -- Relevant Standards & Laws
▪ SA 530, Audit Sampling
Part II -- Requirements of Relevant Standards & Laws

➢ Sampling Risk:
As per SA 530 “Audit Sampling”, the risk that the auditor’s conclusion based on a sample may be
different from the conclusion if the entire population were subjected to the same audit procedure.
Sampling risk can lead to two types of erroneous conclusions:
• In the case of a test of controls, that controls are more effective than they actually are, or
in the case of a test of details, that a material misstatement does not exist when in fact it
does. The auditor is primarily concerned with this type of erroneous conclusion because it
affects audit effectiveness and is more likely to lead to an inappropriate audit opinion.
• In the case of a test of controls, that controls are less effective than they actually are, or in
the case of a test of details, that a material misstatement exists when in fact it does not. This
type of erroneous conclusion affects audit efficiency as it would usually lead to additional
work to establish that initial conclusions were incorrect.
Sampling Risk
The risk that the auditor’s conclusion based on a sample may be different
from the conclusion if the entire population were subjected to the same audit
procedure.

Sampling risk can lead to two types of erroneous conclusions

Type I – Error Type II – Error
In the case of a test of controls, that In the case of a test of controls, that
controls are more effective than they controls are less effective than they
actually are actually are
(Over Reliance on Controls) , (Under Reliance on Controls)
or in the case of a test of details, that ,or in the case of a test of details,

a material misstatement does not that a material misstatement exists
exist when in fact it does when in fact it does not.
(Incorrect Acceptance) . (Incorrect Rejection)

The auditor is primarily concerned This type of erroneous conclusion
with this type of erroneous conclusion affects audit efficiency as it would
because it affects audit effectiveness usually lead to additional work to
and is more likely to lead to an establish that initial conclusions were
inappropriate audit opinion. incorrect .
(Reduces Effectiveness of Audit) (Reduces Effeciency of Audit)

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