Page 146 - CA Inter Audit PARAM

CA Ravi Taori
If a class of transactions or account balance has been divided into strata, the
misstatement is projected for each stratum separately. Projected misstatements
for each stratum are then combined when considering the possible effect of
misstatements on the total class of transactions or account balance.

• Value-Weighted Selection:
• When performing tests of details it may be efficient to identify the sampling unit
as the individual monetary units that make up the population. Having selected
specific monetary units from within the population,
o for example, the accounts receivable balance, the auditor may then
examine the particular items, for example, individual balances, that
contain those monetary units.
• One benefit of this approach to defining the sampling unit is that audit effort is
directed to the larger value items because they have a greater chance of selection
and can result in smaller sample sizes.
• This approach may be used in conjunction with the systematic method of sample
selection and is most efficient when selecting items using random selection.

QNO Extent of Checking On a Sampling Basis| Old Course -- (N18E/M19R/SM20/N20R/SM21/N23E)
530.21 Bhaskar CNO- SA530.280
Discuss the factors that should be considered for deciding upon the extent of checking on a sampling plan.
OR
Factors that should be considered for deciding upon the extent of checking on a sampling plan.
Answer ➢ The factors that should be considered for deciding upon the extent of checking on a sampling plan
are following:
• Size of the organisation under audit. (Big)
• State of the internal control. (Strong)
• Adequacy and reliability of books and records. (Accurate & Reliable)
• Tolerable error range. (Not very small)
• Degree of the desired confidence. (Not very high)
(Then higher reliance on sampling)

QNO Sampling- Traditional Approach- Extensive Checking Old Course -- (N19R/M22M/M22E)
530.23 – All Entities #Unique
The approach to audit and extent of checking are undergoing a progressive change in favour of more
attention towards the questions of principle and controls with a curtailment of non-consequential routine
checking. Discuss the given statement.

OR
There is a growing realisation that the traditional approach to audit is economically wasteful because all
efforts are directed to check all transactions without exception. Explain
Answer Sampling: An Audit Procedure: No conscious effort in human society is divested of economic considerations
and auditing is no exception. There is a growing realisation that the traditional approach to audit is
economically wasteful because all the efforts are directed to check all transactions without any exception.
This invariably leads to more emphasis on routine checking, which often is not necessary in view of the time
and the cost involved. With the shift in favour of formal internal controls in the management of affairs of
organisations, the possibilities of routine errors and frauds have greatly diminished i.e., the internal controls
as designed by the management are for the very purpose of Prevention, Detection and Correction of Frauds
and Errors. Thus, the auditors often find extensive routine checking as nothing more than a ritual because it
seldom reveals anything material. Now the approach to audit and the extent of checking are undergoing a
progressive change in favour of more attention towards the questions of principles and controls with a
curtailment of non-consequential routine checking. By routine checking, we traditionally think of extensive
checking and vouching of all the entries, disregarding the concept of materiality.

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