Page 125 - DCOM509_ADVANCED_AUDITING

Advanced Auditing

Notes Homogeneity is the tendency of items in a population to be similar, or closer to the same dollar
value.

Example: A population containing sales of three kinds of mid-priced property will be
far more homogeneous than a population containing all sales of a Department store.

If a population is non-homogeneous, the auditor can reduce the sample size through stratification
and identifying individually significant items. See Step 7 on performing the sample for an
explanation of how stratification should be done.
The Audit Sampling Work paper, AUD-21, can be used to document whether a population is
homogeneous or not. Whether or not this work paper used, the auditor should document why
the population was either determined to be homogeneous or non-homogeneous.

Sampling Application Analysis

Sampling applications can also be classified by the type of audit procedure in which they are used.
“Compliance tests” are tests which determine whether controls are being complied with. The
answer to a compliance test is yes or no. “Substantive tests” are tests which determine the
amount of some class of items.
Attribute sampling is most often used in compliance tests and variables sampling is most often
used in substantive tests.

Sampling Size Table

This table gives sample sizes for any population over 500 items where variable testing is
performed.

Perform the Sample Step 7

After the sampling plan has been designed, the auditor selects the sample and examines the
selected items to determine if they contain deviations. The sample should also be evaluated to
determine if it is representative of the population. The average value of the sample should be
similar to the average value of the population.
The following problems may arise during the sample procedure:

 Voided Documents: If an auditor randomly or otherwise selects a voided item to be included
in the sample, and has reasonable assurance that the item was properly voided, it should
be replaced with another item selected in accordance with the sampling procedure. The
rule here is not absolute, the auditor or supervisor may make a judgement decision based
on the circumstances associated with the voided transaction.

 Credits: Most populations will contain credits. It may be possible in certain situations to
remove the credits prior to sampling, but care should be taken to avoid inflating the
population’s total value. When stratifying a population it is necessary to use absolute
values in order to keep credits and matching debits within the same strata. One example
of a credit that might generate a reduction in a compensating tax exception total is the
return of an item which had compensating tax accrued and paid at the time of purchase. A
reduction would be acceptable if a reversal of the accrual did not take place and if the
auditor has reasonable assurance that the return is not an unusual event.

 Unused Or Inapplicable Documents: The auditor’s consideration of unused or inapplicable
documents is the same. For example, a sequence of vouchers might include unused vouchers

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