Page 141 - CA Inter Audit PARAM

CA Ravi Taori
population. Although in some circumstances it may be an appropriate audit procedure to
examine a block of items, it would rarely be an appropriate sample selection technique when
the auditor intends to draw valid inferences about the entire population based on the
sample.
• Example
Take the first 200 sales invoices from the sales daybook in the month of September;
alternatively take any four blocks of 50 sales invoices. Therefore, once the first item in
the block is selected, the rest of the block follows items to the completion

QNO-- Case Study Identify Type of Sampling Method - Interval Based Sampling & New Course – (S24M)
Block Selection
530.11.50
Bhaskar CNO – SA530.180
During the audit of a company, CA Z is using a software to select samples pertaining to sales records of the
company. While performing this process, a window opens in software prompting the user to enter certain
information. CA Z is in the process of entering information in this regard as given under: -

Selection Interval ?
Number of records to select 100
Starting record number to select 1

Ending record number to select 1000
File name Sales

Going through the above fields, which method of sampling is likely being used in the software? Discuss.
Which foremost consideration should be kept in mind by auditor for selecting samples in such a manner?

Additionally, partner of CA Z suggested him to select the first 200 sales invoices from the sales book of the
last month. Which method of sampling is being suggested by partner of CA Z?
Answer In the given case, method of sampling being used in software is known as interval sampling or systematic
sampling. It is a selection method in which the number of sampling units in the population is divided by
the sample size to give a sampling interval.

Sampling interval = Sampling units in population/Sample size i.e 1000/100
Sampling interval = 10
Records selected = 100

Software would pick every 10th record from 1 to 1000 records.

When using this method, the auditor would need to determine that sampling units within the population
are not structured in such a way that the sampling interval corresponds with a particular pattern in the
population.

Further, partner of CA Z suggested him to select the first 200 sales invoices from the sales book for the last
month. He is suggesting him block sampling for sales, this method involves selection of a block(s) of
contiguous items from within the population

Case Study Identify Type of Sampling Method - Stratified Sampling & New Course – (S24E)
QNO--
Block Selection
530.11.60 Bhaskar CNO – SA530.180

"Auditors cannot normally examine all the information available to them as it would be impracticable to
do so and using audit sampling will produce valid conclusions. Samples should be selected in such a
manner that it is representative of the population from which the sample is being selected.

Which sample selection method is used in the following two cases? Identify and explain them briefly.
(i) Auditor divided the trade receivables in three groups: balances above ₹ 20 lakhs, balances
between ₹ 10 lakhs to ₹ 20 lakhs and balances below ₹ 10 lakhs. He selected different
percentages of items from each group.

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