Page 127 - DCOM509_ADVANCED_AUDITING

Advanced Auditing

Notes There are three rules for extrapolating:
1. The numerator should be the sample representation of what the auditor is trying to
determine about the population (or strata).

2. The denominator should be the sample representation of the population (or strata).
3. The population should be complete and should not include items that do not represent the
population as defined by the test.

Considering the Qualitative Aspects of Deviations

In addition to evaluating the frequency of deviations, the auditor should consider the qualitative
aspects of the deviations. Qualitative characteristics of the nature and cause of the deviations are:
 Whether the deviations are errors or irregularities,

 Whether the deviations are due to misunderstanding instructions or carelessness, and
 The relationship of the deviations to other phases of the audit.
Non-recurring errors are defined as errors that are caused by factors that do not affect the rest of
the population. An example of a non-recurring error is a sale that was never recorded due to the
fact that the salesman died right after closing the sale.
Non-systematic errors are errors that are caused by factors that may affect the rest of the population
but whose effects are not predictable. An example of a non-systematic error is an error caused by
the taxpayer’s occasional use of salesmen to do accounting work.

Document the Sample Procedures Step 9

Examples of items the auditor should include in the documentation of the sampling test are:

A description of the purpose of the test

1. The definition of the population, the sampling unit, and the item of interest (if different).
2. How was the sample size determined?

3. Was the population determined to be homogeneous or not and how was the determination
made?
4. The definition of a deviation.

5. How were the sampling procedures performed?
If a variables sample is planned, the population must be tested to determine if it is homogeneous.

Self Assessment

Fill in the blanks:
15. …………………. is used to reach a conclusion about a population in terms of an amount.

16. ……………………… is used when the auditor is only concerned with acceptance or rejection
of a hypothesis.
17. ……………. are used by tax auditors to determine if controls which ensure the accuracy of
records are in place and working correctly.
18. Non-homogeneous populations require ……………… size samples.

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