Sampling in Auditing
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| How sampling is done in Auditing |
An overview
This International Average on Auditing (ISA) is relevant. When
the auditor has take decision to use audit sampling in performing audit actions.
It contracts with the auditor’s use of arithmetical and
non-statistical sampling. When scheming and choose the audit sample, performing
tests of controls and tests of particulars, and assess the results from the
sample.
This ISA complements ISA 500….
Which deals with the auditor’s task to plan and perform audit
actions to obtain enough appropriate audit proof to be able to draw reasonable
conclusions on which to stand the auditor’s view.
ISA 500 offers control on the means obtainable to the auditor
for choose items for difficult, of which audit taster is one means.
Now the question arises that is meant by sampling?
“In simple words sampling relates to the selection of one or
more unit from population”
Next question here is that what is population?
So, Population means that whole data from which the we are
going to select the unit. Lets understand It from an example. At our homes our
moms cook delicious food for everyone but sometimes she has doubt about the
taste so she takes a little from it just to check whether the whole dish is
appropriate or not….
That’s the same concept in auditing!!
Let’s relate it …
Whole food is population and that a little checked by mom in
auditing is called sample. And she selected it from the population.
If we properly describe it in terms of International
standards of auditing than we can say that;
Audit sampling (sampling)
The request of audit actions to less than 100% of items
within a population of audit significance such that all sampling item have a
chance of collection in order to offer the auditor with a sensible basis on
which to describe conclusions about the whole population.
Population
The whole set of information from which a sample is chosen
and about which the auditor needs to describe conclusions.
Sampling risk
The risk that the auditor’s conclusion stands on a sample may
be dissimilar from the conclusion if the whole population were subjected to the
same audit process.
Sampling danger can guide to two types of untrue conclusions:
· In the case of an
examine of manages, that manages are more well-organized than they actually
are, or in the case of a test of details.
It actually means…
“That a material misstatement does not tolerate when in fact
it does. The auditor is mainly concerned with this type of untrue conclusion
because it has an effect on audit effectiveness and is more likely to lead to
an unsuitable audit view.”
· In the case of a
test of manages, that manages are less efficient than they really are, or in
the case of a test of factors, that a material misstatement subsists when in
fact it does not.
This kind of mistaken conclusion have an effect on audit competence
as it would typically lead to additional work to set up that early conclusions
were incorrect.
While understanding the sampling concept we need to
understand some terms which are given and explained below:
Non-sampling risk
The danger that the auditor reaches an mistaken conclusion
for any cause not linked to sampling risk.
Anomaly
A misstatement or divergence that is obviously not delegate
of misstatements or divergences in a population.
Sampling unit
The individual items constituting a population.
Sampling Approaches;
Statistical sampling
An Approach to tattering that has the following
characteristics:
(i) Random picks of
the sample things and
(ii) The use of prospect theory to assess sample results, counting
measurement of sampling danger.
Stratification
The procedure of dividing a population into subpopulations,
each of which is a collection of sampling entities which have alike
characteristics (often monetary value).
Tolerable misstatement
A financial amount set by the auditor in value of which the
auditor looks for to get an suitable stage of statement that the financial quantity
set by the auditor is not surpass by the actual misstatement in the populace.
Tolerable rate of deviation
A speed of divergence from prescribed internal control actions set by the assessor in respect of which the auditor looks for to obtain an suitable height of declaration that the speed of divergence set by the auditor is not beat by the actual rate of deviation in the populace.