Chat with AIExam 16: Interpreting Sample-Based Audit Evidence
For the three sampling techniques that aren't likely to result in a representative sample, when might each be used by an auditor?
(28) 
Verifieda. Block sampling may be appropriate in some situations where the auditor is interested in testing a sequence of transactions. Typically many blocks must be sampled for the conclusions to be valid.
b. Haphazard sampling may be used when the documents are physically available to the auditor, who may simply reach in to a file and pull out 10 invoices without looking at them or considering any attributes about the invoices. Also, for tests of process controls that involve observing employee actions, the auditor might choose to perform haphazard sampling when visiting the client's facilities for other reasons. This might be employed when a random number table is not available or in the case that documents or items are not pre-numbered.
c. The auditor may use judgmental sampling when he wishes to consider the attributes of the items in the population when determining which ones to examine. This approach does not necessarily result in a representative sample, but its use is often justified because it allows the auditor to focus on items that are more likely to have problems or have a material impact on the financial statements. Common attributes that the auditor might consider when judgmentally selecting a sample include: magnitude of a transaction, date of a transaction, parties to the transaction and the nature of underlying assets and liabilities. For example, knowledge that the bookkeeper takes a vacation in August and is replaced by several temps could induce a judgmental sample that places emphasis on August transactions.
Describe some difficulties in defining the population or sample.
(31) VerifiedDefining the population or sample unit may be more difficult in some situations. For example, if the auditor is interested in testing for completeness, he or she must determine what population to use as the basis for the sample, since the auditor is interested in what has been omitted. The auditor may need to choose a differently defined population for testing completeness. This approach could be effective, but it may be inefficient since the auditor will have to look at more items. Another problem with defining the population occurs when time-dependent or location-dependent samples are used. Here both the selection of locations and the time are critical for determining the sample.
What five sampling techniques are commonly used by auditors?
(38) VerifiedThe five sampling techniques most commonly used by auditors are random sampling, systematic sampling, block sampling, haphazard sampling, and judgmental or directed sampling.
Regardless of how an auditor obtains a sample, what three issues must the auditor consider when obtaining evidence using a sample-based audit procedure?
(41) What are the three possible outcomes for a sample-based attributes test?
(29) You have performed dollar unit sampling on an audit and discovered that an unacceptable risk exists that the account is misstated in an amount that exceeds tolerable error. What are the advantages and disadvantages of your possible responses?
(49) Briefly describe the history of the use of statistical sampling by auditors in the last two decades or so.
(45) What two main factors will determine the sample size for a given audit procedure?
(42) 
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