Page 143 - CA Inter Audit PARAM

CA Ravi Taori
during tests of details. How should he proceed to analyse the nature and cause of the deviations and
misstatements observed in the sample results?
Answer In the given case, while performing tests of details on a sample in respect of sales, misstatements have been
found by CA Shubham in selected sample pertaining to the sales transactions of small values. This indicates
observance of deviations and misstatements while performing tests of controls and tests of details
respectively in selected samples.

As per SA 530, “Audit Sampling”, in analysing the deviations and misstatements identified, the auditor may
observe that many have a common feature, for example, type of transaction, location, product line or period
of time.

In such circumstances, the auditor may decide to identify all items in the population that possess the common
feature, and extend audit procedures to those items. In addition, such deviations or misstatements may be
intentional, and may indicate the possibility of fraud.

Therefore, the auditor shall investigate the nature and causes of any deviations or misstatements identified,
and evaluate their possible effect on the purpose of the audit procedure and on other areas of the audit.

In the extremely rare circumstances when the auditor considers a misstatement or deviation discovered in a
sample to be an anomaly, the auditor shall obtain a high degree of certainty that such misstatement or
deviation is not representative of the population. The auditor shall obtain this degree of certainty by
performing additional audit procedures to obtain sufficient appropriate audit evidence that the misstatement
or deviation does not affect the remainder of the population.

QNO Projecting Misstatements for Population Old Course – (M19R/M20R/N20E/N23M/N23R)
530.15 Bhaskar CNO- SA530.240
The auditor is required to project misstatements for the population to obtain a broad view of the scale of
misstatement. Explain
OR
The auditor is required to project misstatements for the population to obtain a broad view of the scale of
misstatement, but this projection may not be sufficient to determine an amount to be recorded. Explain
Answer ➢ For tests of controls, no explicit projection of deviations is necessary since the sample deviation
rate is also the projected deviation rate for the population as a whole. SA 330 provides guidance
when deviations from controls upon which the auditor intends to rely are detected.

➢ For tests of details, the auditor shall project misstatements found in the sample to the population.
• The auditor is required to project misstatements for the population to obtain a broad view
of the scale of misstatement, but this projection may not be sufficient to determine an
amount to be recorded.

➢ When a misstatement has been established as an anomaly, it may be excluded when projecting
misstatements to the population. However, the effect of any such misstatement, if uncorrected,
still needs to be considered in addition to the projection of the non-anomalous misstatements.

QNO Multiple Definitions #Unique Old Course – (M21R)
530.16
Explain the following terms with reference to Audit Sampling :
(i) Stratification

(ii) Tolerable misstatement
(iii) Tolerable rate of deviation
Answer (i) Stratification – The process of dividing a population into sub-populations, each of which is a
group of sampling units which have similar characteristics (often monetary value).

(ii) Tolerable misstatement – A monetary amount set by the auditor in respect of which the auditor
seeks to obtain an appropriate level of assurance that the monetary amount set by the auditor
is not exceeded by the actual misstatement in the population.

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