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Attribute Sampling in Auditing: Determining Test Objectives, Populations, and Sample Sizes, Summaries of Auditing

Guidelines for auditors on how to plan and execute attribute sampling during audits. It covers determining test objectives, defining populations and exceptions, and calculating sample sizes based on desired confidence levels and tolerable exception rates. The document also discusses minimum sample sizes for populations of different sizes and the importance of evaluating and reporting exceptions.

What you will learn

  • How does the size of the population being tested affect the minimum sample size for attribute testing?
  • What factors should auditors consider when determining the sample size for attribute testing?
  • What should auditors do if exceptions are discovered during attribute testing?

Typology: Summaries

2021/2022

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bg1
2000.04 REV-2
CHG-lO
Appendix
A
Attribute
Sampling
This
appendix applies
to all
chapters
in
this audit
guide.
When
planning
to
test
a
particular
sample
of
transactions,
the
auditor
should consider
the
specific
audit
objective
to
be
achieved
and
should
determine
whether
the
audit procedure
or
combination
of
procedures
to
be
applied
will
achieve
that
objective.
The
size
of
a
sample
necessary
to
provide
sufficient
evidential
matter depends
on
both
the
objectives
and
the
efficiency
of
the
sample.
As
noted
in
section
l-7C
of
chapter
1,
all
material
instances
of
noncompliance, including
those
identified
through sampling,
must
he
reported
as
findings
in
the
audit
report.
Determining
Test
Objective,
Defining
the
Population,
and
Defining
an
Exception.
Before
beginning
testing,
the
auditor
must
understand
and
document
what
attribute
and/or
assertions
are
being
tested.
The
auditor
needs
to
identify
and
document
the
appropriate
population
and
should
also
perform
procedures
(e.g.,
reconciliations,
inquiry)
to
ensure
that
the
population
from
which
the
samples
are
selected
is
complete.
Each
compliance
requirement
selected
for
testing should
be
considered
a
separate
population,
and
samples
should
be
selected
accordingly.
The
sample
selected
could
possibly
be
used
to
test
multiple
attributes within each
compliance
requirement.
Additionally, auditors
must assess
the
control
environment
at
entities
with
multiple
locations.
If
controls
at
the
different
locations
are
significantly
different,
each
location
must
be
considered
a
separate population.
The
auditor
must
document
the
“sampling
unit,”
which
is
the
individual
item
subject
to
sampling
in
the
population
(i.e.,
reconciliations.
loan
files,
cash
disbursements.
cash
receipts,
etc.).
When selecting
the
sample
of
individual
items,
auditors
must ensure
that
the
sample
is
representative
of
the
universe
for
the
compliance
requirement
being
tested.
The
auditor
should
also
clearly
define what
would
be
considered
an
exception.
A
single
exception would indicate
noncompliance,
subject
to
further
determination
of
materiality
necessary
to
determine
the
required method
of
reporting.
A.
Determining
the
Sample
Size.
To
determine
attribute
testing
sample
sizes,
the
auditor
needs
to
determine
the
value
for
three
inputs:
desired
confidence
level,
tolerable
exception
rate,
and expected
exception
rate.
The
compliance
table
sample
size
is
based
on
the
following
expectations.
3/2011
Page
1
pf3
pf4

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Download Attribute Sampling in Auditing: Determining Test Objectives, Populations, and Sample Sizes and more Summaries Auditing in PDF only on Docsity!

2000.04 REV-

(^) CHG-lO

Appendix

A

Attribute

Sampling

This (^) appendix applies

(^) to all

(^) chapters

(^) in (^) this audit

(^) guide.

When

(^) planning

(^) to (^) test (^) a (^) particular

(^) sample

(^) of (^) transactions,

(^) the (^) auditor

(^) should consider

(^) the

specific

(^) audit

(^) objective

(^) to (^) be (^) achieved

(^) and (^) should

(^) determine

(^) whether

(^) the (^) audit procedure

(^) or

combination

(^) of (^) procedures

(^) to (^) be (^) applied

(^) will (^) achieve

(^) that (^) objective.

(^) The

(^) size (^) of (^) a sample

necessary

(^) to (^) provide

(^) sufficient

(^) evidential

(^) matter depends

on^ (^) both

(^) the (^) objectives

(^) and (^) the

efficiency

(^) of (^) the (^) sample.

As (^) noted

(^) in (^) section

(^) l-7C

(^) of (^) chapter

(^) all (^) material

(^) instances

(^) of

noncompliance, including

(^) those

(^) identified

(^) through sampling,

(^) must

(^) he (^) reported

(^) as (^) findings

in the (^) audit

(^) report.

Determining

Test^ (^) Objective,

(^) Defining

(^) the Population,

(^) and (^) Defining

an^

BeforeException.

(^) beginning

(^) testing,

(^) the (^) auditor

(^) must

(^) understand

(^) and (^) document

(^) what

(^) attribute

(^) and/or

assertions

(^) are (^) being

(^) tested.

The (^) auditor

(^) needs

(^) to (^) identify

(^) and (^) document

(^) the (^) appropriate

population

(^) and (^) should

(^) also (^) perform

(^) procedures

(^) (e.g.,

(^) reconciliations,

(^) inquiry)

(^) to (^) ensure

(^) that

the (^) population

(^) from

(^) which

(^) the (^) samples

(^) are (^) selected

(^) is (^) complete.

Each

compliance

requirement

selected

for (^) testing

(^) should

(^) be

considered

a separate

population,

(^) and (^) samples

(^) should

(^) be (^) selected

(^) accordingly.

The (^) sample

(^) selected

(^) could

possibly

be used

to test

multiple

attributes

within

each

compliance

requirement.

Additionally,

(^) auditors

(^) must

(^) assess

(^) the (^) control

(^) environment

(^) at (^) entities

(^) with

(^) multiple

locations.

If controls

(^) at (^) the (^) different

(^) locations

(^) are (^) significantly

(^) different,

(^) each

(^) location

must (^) be (^) considered

(^) a (^) separate population.

The (^) auditor

(^) must

(^) document

(^) the (^) “sampling

(^) unit,”

(^) which

(^) is (^) the (^) individual

(^) item

(^) subject

(^) to

sampling

(^) in (^) the (^) population

(^) (i.e.,

(^) reconciliations.

(^) loan

(^) files,

(^) cash

(^) disbursements.

(^) cash

receipts,

(^) etc.).

When selecting

(^) the (^) sample

(^) of (^) individual

(^) items,

(^) auditors

(^) must ensure

(^) that (^) the (^) sample

(^) is

representative

(^) of (^) the (^) universe

(^) for (^) the (^) compliance

(^) requirement

(^) being

(^) tested.

The (^) auditor

(^) should

(^) also (^) clearly

(^) define what

(^) would

(^) be (^) considered

(^) an (^) exception.

A

single

exception would indicate

(^) noncompliance,

(^) subject

(^) to (^) further

(^) determination

(^) of (^) materiality

necessary

(^) to (^) determine

(^) the (^) required method

(^) of (^) reporting.

A.

Determining

(^) the (^) Sample

(^) Size.

To (^) determine

(^) attribute

(^) testing

(^) sample

(^) sizes,

(^) the (^) auditor

(^) needs

(^) to (^) determine

(^) the (^) value

for (^) three

(^) inputs:

(^) desired

(^) confidence

(^) level,

(^) tolerable

(^) exception

(^) rate,

(^) and expected

exception

(^) rate.

The (^) compliance

(^) table

(^) sample

(^) size

(^) is (^) based

(^) on (^) the (^) following

expectations.

3/

Page

REV-

CHG-

Desired

(^) Confidence.

Auditors

(^) should

(^) obtain

(^) a (^) high (^) degree

(^) of (^) assurance

by (^) using

(^) a confidence

(^) level

(^) of (^) 90. (^) 95. (^) or (^99) (^) percent.

Tolerable

(^) Exception

(^) Rate.

(^) A (^) 5- (^) percent

(^) exception

(^) rate (^) is (^) acceptable.

Expected Exception

(^) Rate.

(^) No (^) exceptions

(^) should

(^) be (^) accepted.

Materiality.

Using

(^) attribute

(^) testing.

(^) monetary

(^) materiality,

(^) or (^) tolerable

misstatement

(^) is (^) not a^ (^) necessary

(^) input

(^) for (^) determining

(^) sample

(^) size.

B.

Sample

(^) Size

(^) Table.

(^) Using the

(^) preferences

(^) above and

(^) an (^) attribute

(^) sampling

software

(^) program,

(^) if (^) a high (^) level

(^) of (^) assurance

(^) is (^) defined

(^) as 90

(^) percent

(^) confidence

and (^) tolerable

(^) exception

(^) rate (^) is (^5) or (^10) (^) percent with

(^) an (^) expectation

(^) of zero^

exceptions,

(^) the (^) sample

(^) size (^) is (^48) (^) or (^23) (^) (respectively

(^) for (^5) and (^10) (^) percent

(^) exception

rates),

(^) which

(^) is (^) rounded

(^) to (^50) (^) and (^25) (^) below.

(^) Similarly,

(^) using

(^95) (^) percent

confidence,

(^) zero (^) exceptions,

(^) and (^) a (^5) or (^10) (^) percent tolerable

(^) exception

(^) rate, (^) the

sample

(^) size (^) is (^64) or^ (^) 32, (^) which

(^) is (^) rounded

(^) to (^65) (^) and (^35) (^) below.

Compliance

(^) sample

(^) size (^) table

Importance/significance

(^) of

Confidence

Tolerable

Minimum

(^) sample

(^) size (^) for

the (^) attribute

(^) being

(^) tested

level

rate

populations

(^) over

(^200)

Low

Low

High

I

High

This table

(^) is (^) illustrative

(^) but does

(^) not replace

(^) professional

(^) judgment.

As (^) noted

(^) in (^) the (^) table,

these

are^ (^) minimum

(^) sample

(^) sizes, and

(^) there

(^) may (^) be (^) many

(^) situations

(^) in (^) which

the^ (^) auditor

should

(^) also (^) consider

(^) qualitative

(^) factors

(^) when

(^) determining

(^) sample

(^) size.

Such (^) qualitative

factors may

(^) include

(^) but (^) are (^) not (^) limited

(^) to

First (^) year (^) the (^) auditor

(^) audited

(^) an (^) entity.

Larger,

(^) decentralized

(^) entities.

High (^) number

(^) of (^) findings

(^) in (^) the past.

Significant

(^) deficiencies

(^) or material

(^) weaknesses

(^) in (^) the (^) past.

Poor (^) internal

(^) controls.

Extremely

(^) high (^) volume

(^) of (^) activity

(^) in (^) a particular

(^) compliance

(^) requirement.

High (^) project employee

(^) turnover

(^) in (^) a particular

(^) area (^) or (^) department.

If the initial

(^) sample

(^) does not

(^) include

(^) a particular

(^) attribute

(^) being

(^) tested.

(^) typically

there would

(^) be (^) a (^) need

(^) to (^) have

(^) additional

(^) items

(^) included

(^) in (^) the (^) sample

(^) to (^) address

just (^) that (^) specific

(^) attribute.

4/

Page

REV-

CHG-

F.

Technical

(^) Assistance

(^) Available.

Technical

(^) guidance

(^) on (^) audit

(^) sampling

(^) is

available

(^) in (^) the (^) following

(^) documents:

SAS

(^) No. (^) 39. (^) Audit

(^) Sampling

(AICPA)

SAS

(^) No (^) 111. (^) Amendment

(^) to (^) SAS (^) No, (^) 39, (^) Audit

(^) Sampling (AICPA,

(^) Professional

Standards, vol.

AU

(^) sec. (^) 350),

(^) as (^) amended

AICPA

(^) Audit

(^) Guide.

(^) Audit

(^) Sampling,

(^) New Edition

(^) as (^) of (^) April

(^) 1, (^2001)

AICPA

(^) Audit

(^) Guide.

(^) Government

(^) Auditing Standards

SAS

(^) No. (^) 74.

Compliance

(^) Auditing Considerations

(^) in (^) Audits

(^) of (^) Governmental

Entities

and

Recipients

of Governmental

Financial

Assistance

(AICPA,

Professional Standards,

(^) vol. (^) 1, (^) AU (^) sec. (^) 801)

4/

Page