Page 142 - CA Inter Audit PARAM

CA Ravi Taori
(ii) Auditor uses the sample of 50 consecutive cheques to test whether the cheques are signed by
authorized signatories, rather than picking 50 single cheques throughout the year."
Answer Sample Selections Methods:
(i) Stratified Sampling method involves dividing the whole population to be tested in a few separate
groups called strata and taking a sample from each of them. Each stratum is treated as if it was
a separate population and proportionate of items are selected from each of these stratum. The
number of groups into which the whole population has to be divided is determined on the basis
of auditor judgment.

In the given case, Auditor divided the trade receivables in three groups i.e. balances above ₹ 20
lakhs, balances between ₹ 10 lakhs to 20 lakhs and balances below ₹ 10 lakhs and he selected
different percentages of items from each group will be considered as Stratified Sampling.

(ii) Block Sampling: This method involves selection of a block(s) of contiguous items from within the
population. Usually, a range of continuous transaction shall have similar characteristics,
therefore, selection of a group at one time will not give a reasonable basis for opinion on the
overall population as different types of transactions and unusual transactions may not be
covered in the group taken all at once.

In the given case, the auditor uses the sample of 50 consecutive cheques to test whether the
cheques are signed by authorized signatories, rather than picking 50 single cheques throughout
the year is Block Selection Method.

QNO Selection has been done on a random Old Course -- (P16M/M16R/M18R/N18M)
530.13 basis Bhaskar CNO- SA530.180
In cases where audit sample selection has been done on a random basis, no statistical process for selection

of samples needs to be followed.
Answer ➢ Selection of Audit Sample:
• 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 auditor to obtain and
evaluate audit evidence about some characteristics of the items selected in order to form or
assist in forming a conclusion concerning the population.

• The audit sample collection on a random basis ensures that all items in the population have
an equal chance of selection, for example, by use of random number tables. This method is
considered appropriate, provided the population to be sampled consists of reasonably
similar units and fall within a reasonable range.

• Thus, strictly speaking, in case of selection of an audit sample on the basis of random tables
there is no need to follow any other statistical process for selection of sample. In fact,
selection of an audit sample on random basis is the pre-requisite for application of statistical
techniques.

• However, certain methods such as Haphazard Sampling and Block Sampling may result in
selection of a sample, which is not free from bias. Therefore, whenever audit sample
selection has been done on a random basis i.e. selection of a representative sample, no
statistical process for selection of sample needs to be followed.
Author’s Note
Covered in 530.11

QNO-- Nature & Cause of Deviations New Course – (J25M)
530.14 Bhaskar CNO – SA 530.220

CA Shubham, the auditor of Sigma Limited, is performing tests of controls and tests of details using audit
sampling. During these procedures, he observed deviations in compliance with management's prescribed

procedures for sales transactions of small values of a product at one location during tests of controls.
Additionally, misstatements were identified in the sample related to these small-value sales transactions
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