Revision Exercise
Question 2 of handout on page 280 – 281
(1) Population is all the ballet papers at the voting station
Sampling unit is one ballet paper
Sampling is many ballet papers
(2) Stratification is where population is split up into smaller populations based on a similar
characteristic. In this example, we can split it by voting station or by the nine provinces.
(3) Statistical sampling is the use of mathematical measurement techniques to calculate
formal statistical results and quantify sample risk.
Examples: Systematic sample selection results in the systematic or methodical
selection of a sample based on orderly steps.
Random selection is when a sample is randomly selected using a random number
generator application / software with no specific order.
Non-statistical sampling relies on professional judgement to determine sample size
and to evaluate results.
Examples: Directed selection is when a sample is selected by means of judgemental
reasoning rather than probabilistic concepts.
Haphazard selection is when the sample is selected on a hit and miss basis with no
regard for amount or description.
Blocked selection is when documents or transactions are selected in sequence.
(4) Step 1: Objective of the test
Step 2: Define the attribute and deviation
Step 3: Define the population and sampling unit
Step 4: Determine the sample method
Step 5: Determine the sample size
Step 6: Select the sample
Step 7: Test the sample
Step 8: Evaluate the results
Step 9: Conclude on the results
Step 10: Consider qualitative factors
(5) A deviation is the inclusion of an invalid ballet paper or spoilt ballet papers in the vote
count.
(6) Scan an ID book of a voter to ensure that the voter is registered to vote. (strong
procedure)
Observe whether the voters are requested to provide their ID book to officials who
then scans and provides them with 2 ballet papers. (weak procedure)
Exercise 1
Question 3 of handout on page 281
Working paper number: X1
Company name: AquaAmanzi
Period: None given
Audit engagement: Ensuring customer credit worthiness and credit limit is checked before
goods sold.
Date: 27 September 2021
Prepared by: Ismail Mohamed CA(SA)
Reviewed by: Manager
(1) Step 1: Objective of the test
Ensuring customer credit worthiness and credit limit is checked before pipes sold.
Step 2: Define the attribute and deviation
Attribute: Credit managers’ initials on the sales invoice.
Deviation: No initials of the credit manager on the sales invoice.
Step 3: Define the population and sampling unit
Population: 2 925 sales invoices (6 025 – 3 101 + 1)
Sampling unit: One sales invoice
Step 4: Determine the sample method
Statistical sampling (systematic or random selection)
Step 5: Determine the sample size
Beta: 5%
TDR: 6%
EPDR: 3%
Sample size = 195 (6 errors)
(2) Step 1: Interval
= Population / sample size
= 2 925 / 195
= 15
Step 2: Starting point
Use the 10th sales invoice as starting point
= 3 101 + 10
= 3 111
Step 3: Selection
Selection 1 = 3 111
Selection 2 = 3 111 + 15 = 3 126
Selection 3 = 3 126 + 15 = 3 141
Selection 4 = 3 141 + 15 = 3 156
Selection 5 = 3 156 + 15 = 3 171 (or for the advance, 3 111 + (15 x 4th) = 3 171)
Selection 10 = 3 111 + (15 x 9) = 3 246
(3) Evaluating of results (CUDR calculation)
Beta: 5%
Sample size: 195
Deviations: 8
Sample size
150
200
Difference = 50
Deviation
8
8
CUDR
9.4
7.1
Difference = 2.3
Option 1:
150 – 195 = - 45
2.3 / 50 x 45 = 2.07
9.4 – 2.07 = 7.33
Option 2:
200 – 195 = 5
2.3 / 50 x 5 = 0.23
7.1 + 0.23 = 7.33
Therefore, CUDR is 7.33%.
The CUDR (7.33%) > TDR (6%) and therefore the control activity is ineffective.
(4) Conclusion of results
The internal auditor is 95% confident that the actual deviation rate in the population is
not greater than 7.33% or that less than 92.67% of all sales invoices have been initialed
by the credit manager. As the TDR is 6%, the population is acceptable / the control
activity is ineffective.
(5) Consider other factors
Increase sample size
Reconsider readjusting TDR
Reconsider the amount of comfort / reliance placed on test of controls