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CHAPTER 14

CHAPTER 14. AUDIT SAMPLING FOR TESTS OF DETAIL OF BALANCES. NONSTATISTICAL SAMPLING PLAN. STATE OBJECTIVES OF TEST EVIDENCE OF MISSTATEMENT IN ACCOUNT BALANCE DECIDE IF SAMPLING APPLIES DEFINE MISSTATEMENT CONDITIONS DEFINE POPULATION STRATIFICATION SAMPLING UNIT

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CHAPTER 14

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  1. CHAPTER 14 AUDIT SAMPLING FOR TESTS OF DETAIL OF BALANCES

  2. NONSTATISTICAL SAMPLING PLAN • STATE OBJECTIVES OF TEST • EVIDENCE OF MISSTATEMENT IN ACCOUNT BALANCE • DECIDE IF SAMPLING APPLIES • DEFINE MISSTATEMENT CONDITIONS • DEFINE POPULATION • STRATIFICATION • SAMPLING UNIT • LOGICAL UNIT – ITEM MAKING UP BALANCE • DOLLAR IN POPULATION • TOLERABLE MISSTATEMENT • ACCEPTABLE RISK OF INCORRECT ACCEPTANCE • FIGURE 14-3, PAGE 488

  3. DETERMINE INITIAL SAMPLE SIZE • FIGURE 14-4, PAGE 489 • SELECT SAMPLE • PERFORM AUDIT PROCEDURES • GENERALIZE FROM SAMPLE TO POPULATION • POINT ESTIMATE OF POPULATION MISSTATEMENT • JUDGMENT REGARDING ALLOWANCE FOR SAMPLING RISK – STATISTICAL SAMPLING • TOLERABLE MISSTATEMENT – NONSTATISTICAL • ANALYZE MISSTATEMENTS • ACTION TO REJECT POPULATION • RELATE TO OTHER TESTS • EXPAND AUDIT TESTS • INCREASE SAMPLE SIZE • ADJUST ACCOUNT BALANCE • REQUEST CLIENT ASSISTANCE • MODIFY OPINION

  4. MONETARY UNIT SAMPLING • OTHER NAMES • DOLLAR UNIT SAMPLING • PROBABLITITY-PROPORTIONATE TO SIZE SAMPLING • DIFFERENCES BETWEEN NONSTATISTICAL SAMPLING • INDIVIDUAL DOLLAR SAMPLING UNIT • POPULATION SIZE IS NUMBER OF “NORMAL” DOLLARS IN BALANCE • PRELIMINARY ESTIMATE OF MATERIALITY • SAMPLE SIZE USING FORMULA • SAMPLE SELECTION USING PPS • PROJECT TO POPULATION USING MUS • NO MISSTATEMENTS FOUND • SOME MISSTATEMENTS FOUND

  5. GENERALIZE TO POPULATION- NO EXCEPTIONS • POPULATION = $1,200,000 • SAMPLE SIZE = 100 • ACCEPTABLE RISK OF INCORRECT ACCEPTANCE = 5% • USE TABLE ON PAGE 425 • INTERSECTION OF 100 SAMPLE SIZE AND 0 MISSTATMENTS = 3% • CONCLUSION IS THAT THERE IS A 5% RISK THAT MORE THAN 3% OF DOLLARS IN POPULATION ARE MISSTATED • UPPER AND LOWER BOUND = $36,000 (3%X$1,200,000) IS A CONSERVATIVE ESTIMATE OF MISSTATEMENT

  6. GENERALIZE TO POPULATION – SOME MISSTATEMENTS • SAME ASSUMPTIONS AS ABOVE • OVERSTATEMENTS AND OVERSTATEMENTS ARE SEPARATED, THEN COMBINED • DIFFERENT MISSTATEMENT ASSUMPTION MADE FOR EACH MISSTATEMENT INCLUDING ZERO MISSTATEMENTS • LAYERS OF COMPUTED UPPER EXCEPTION RATE FROM ATTRIBUTES SAMPLING TABLE • MISSTATEMENT ASSUMPTION ASSOCIATED WITH EACH LAYER • ADJUSTMENT FOR OFFSETTING AMOUNTS • DECIDE ACCEPTABLITY OF POPULATION

  7. DETERMINE SAMPLE SIZE • MATERIALITY • ESTIMATED PERCENT MISSTATEMENT FOR POPULATION ITEMS CONTAINING MISSTATEMENT • ACCEPTABLE RISK OF INCORRECT ACCEPTANCE • POPULATION VALUE • ESTIMATE POPULATION EXCEPTION RATE • EXAMPLE PAGE 502

  8. VARIABLES SAMPLING • SAMPLING DISTRIBUTIONS • STATISTICAL INFERENCE • VARIABLE SAMPLING TECHNIQUES • MEAN-PER-UNIT (MPU) • DIFFERENCE ESTIMATION • RATIO ESTIMATION • POINT ESTIMATE OF POPULATION VALUES • MPU • TOTAL AUDIT VALUE IN SAMPLE / SAMPLE SIZE (#0 • AVERAGE AUDIT VALUE X NUMBER ITEMS IN POP. • DIFFERENCE ESTIMATION • TOTAL MISSTATEMENT IN SAMPLE / SAMPLE SIZE (#) • AVERAGE MISSTATEMENT X ITEMS IN POPULATION • RATIO ESTIMATION • TOTAL MISTATEMENT IN SAMPLE / SAMPLE SIZE ($) • PERCENTAGE OF MISSTATEMENT X POPULATION ($)

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