Page 123 - DCOM509_ADVANCED_AUDITING

Advanced Auditing

Notes 5. What tests can be done of the remaining period to further substantiate the sample results?
6. What other matters are relevant to the sample results? Have conditions which might affect
the results changed in the remaining period?
Define the Sampling Unit

A sampling unit is any of the individual elements constituting the population. The auditor
should define the sampling unit in light of what is being tested and the type of records kept by
the taxpayer. A sampling unit may be, for example, a document, an entry in a journal, a line
item, or a single transaction.
It is possible to sample based on time period representations such as days, weeks, or months.
The department has set minimums of 30, 25, and 9 respectively. The days, weeks, or months
should be randomly selected from the entire audit period. Random sampling within the selected
days, weeks, or months is encouraged.
Regardless of the type of time period selected the number of items of interest (invoices, line
items, transactions, etc.) must be achieved for the population type. In most time period samples
the items of interest will exceed the minimum required.

Consider the Completeness of the Population

The population is physically represented by some form of record. For instance, sales invoices,
entries in a sales journal or summary entries in a ledger may represent total sales. The auditor
actually selects sampling units from this physical representation and so must confirm that all
sample units from this record are included in the entire population. If the physical representation
differs from the actual population, the auditor might make erroneous conclusions about the
population.

Example: Testing a depreciation schedule where a page of the schedule is missing.
Therefore, the auditor should be careful to determine that the records used to draw the sample
are complete and reflect the actual population being tested. One means of doing this is comparing
different records and reconciling differences found.

Determine the Method of Selecting the Sample Step 5

Sample items should be selected in such a way that the sample can be expected to be representative
of the population. Therefore, all items in the population should have an equal opportunity to be
selected.

Random-Number Selection

The auditor may select a random sample by corresponding random numbers generated by a
computer or selected from a random number table with document numbers. The random number
generating software programs utilized by the department provide seed numbers which can be
used to duplicate a specific list of random numbers. The seed number should be documented
within the audit work papers.
Examples of Random Selection: When a listing is available, even if the items are unnumbered or
have non-continuous or non-systematic numbering systems, the random number sampling can
be accomplished by making use of the page and line number.

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