Page 147 - CA Inter Audit PARAM
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The extent of the checking to be undertaken is primarily a matter of judgment of the auditor. There is nothing
statutorily stated anywhere which specifies what work is to be done, how it is to be done and to what extent
it has to be done. It is also not obligatory that the auditor must adopt the sampling technique. What he is to
do as an auditor is to express his opinion on the financial statements and become bound by that.
To ensure good and reasonable standard of work, he should adopt standards and techniques that can lead
him to an informed professional opinion. On consideration of this fact, it can be said that it is in the interest
of the auditor that if he decides to form his opinion on the basis of a part checking (i.e., sampling), he should
adopt standards and techniques which are widely followed and which have a recognised basis.
Since statistical theory of sampling is based on a scientific law, it can be relied upon to a greater extent than
any arbitrary technique which lacks in basis and acceptability. This enables the auditor to make conclusions
and express fair opinion without having to check all of the items within the financial statements.
QNO Precautions of Test Check #Unique Old Course -- (SM20/M21E/SM21)
530.24 New Course -- (SM25)
What precautions should be taken by the auditor while applying test check techniques?
Answer Precautions to be taken while applying test check techniques are
➢ Thorough study of accounting system should be done before adopting Sampling.
➢ Proper study of internal control systems.
➢ Areas which are not suitable for sampling should be carefully considered. E.g.: compliance with
statutory provisions, transactions of unusual nature etc.
➢ Proper planning for Sampling methods to be used and explaining the staff,
➢ Transactions and balances have to be properly classified (stratified)
➢ Sample size should be appropriately determined.
➢ Sample should be chosen in unbiased way,
➢ Errors located in the sample should be analyzed properly.
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