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CA Ravi Taori
(CNO-SA530.040) Sampling Process
1. Sample Designing: It is a Preliminary step, where important decisions are taken related to Sampling.
Designing means to Decide.
2. Sample Size: What will be our sample size. Bigger the sample size, smaller the audit risk
3. Selection of Items for Testing (Sampling Selection Method): Method of choosing samples for testing.
4. Performing Audit Procedures: Perform different audit procedures on selected samples.
5. Nature and Cause of Deviations and Misstatements: Analyse the nature & cause of deviations &
misstatements
6. Projecting Misstatements: Projecting the misstatements in the entire population based on sample testing.
7. Evaluating Results of Audit Sampling & Taking Action: Finally, analyse whether the population is
misstated or not within our tolerable limit.
(CNO-SA530.060) Step 1 - Sample Design
1A. Define Population and its Characteristic: Consider on what population, sampling be used .
1B. Stratification: Dividing population into subset to help in sampling.
2A. Consider Purpose: what is the specific purpose to be achieved.
2B. Consider Audit Procedure: Choose the best combination of audit procedure that will serve the purpose.
2C. Nature of Audit Evidence: Consider what should be the audit evidence nature which is sought.
2D. What constitutes Misstatements: define possible deviation or misstatements which can constitute
misstatements
Role of Expected Rate of Deviation & Misstatement in Sample Designing
Difference Between RMM Vs Expected Deviation / Misstatements
RMM Expected Rate of Deviation &
Expected Level of Misstatement
Timing at the Initial Stage Just before Sampling
Basis on the Information collected Some testing before determining
Expected Rate of Deviation (Test of Control): For tests of controls, the auditor assesses the expected rate of
deviation based on understanding relevant controls or examining a small number of items. This guides the
design of the audit sample and determination of sample size.
Decision (Test of Control): If the expected rate of deviation is high, the auditor may decide not to perform
tests of controls. Perform more substantive procedures.
Expected Level of Misstatement (Test of Details): For tests of details, the auditor assesses the expected
misstatement in the population.
Decision (Test of Details): If the expected misstatement is high, 100% examination or use of a large sample
size may be appropriate for tests of details.
(CNO-SA530.080) Step 2 - Sample Size
Reduce Sampling Risk: The auditor shall determine a sample size to reduce sampling risk to an acceptable
level. Lower risk requires a greater sample size.
Determination Approach: The sample size can be determined through a statistically based formula or
professional judgment.
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