LECTURE OUTLINE CHAPTER 9
Audit Sampling
Brief Topical Outline
A.
Definition of audit sampling—performing a procedure on less than 100% of the items in the
population to arrive at a conclusion about the population (PowerPoint 9-2)
B.
Basic concepts
1.
2.
3.
Sampling risk and non sampling risk
Comparison of statistical and nonstatistical sampling (PowerPoint 9-3)
Selection of sampled items (PowerPoint 9-4)
— Random number table (PowerPoint 9-5)
— Random number generator
— Systematic sampling
C.
Stratification (pages 337-8 of textbook)
D.
Sampling plans (PowerPoint 9-6)
1.
2.
3.
4.
E.
Attributes sampling
Discovery sampling
Classical variables sampling
Probability-proportional-to-size sampling
Sampling concepts
1.
2.
Allowance for sampling risk (precision)
Sample size
3.
F.
Audit sampling for tests of controls
1.
2.
3.
4.
5.
G.
4.
5.
Sampling risks (PowerPoint 9-10)
Procedures (PowerPoint 9-11)
Mean-per-unit estimation
— Normal distribution
— Standard deviation (PowerPoint 9-12)
— Controlling sampling risk
— Factors affecting sample size (PowerPoint 9-13)
— Determining sample size (PowerPoint 9-14)
— An application (illustrated on pages 353-356 of textbook and by PowerPoints 9-15, and 918)
Ratio and difference estimation
Nonstatistical variables sampling (PowerPoint 9-19, 9-20, and 9-21)
Probability-proportional-to-size sampling (Appendix 9A)
1.
2.
3.
4.
5.
6.
I.
Sampling risks (PowerPoint 9-8)
Procedures (PowerPoint 9-9)
Discovery sampling
Sequential sampling
Nonstatistical sampling
Audit sampling for substantive tests
1.
2.
3.
H.
Requirements and approach to all sampling applications (PowerPoint 9-7)
Determination of sample size
Controlling sampling risk
Method of sample selection (systematic)
Evaluation of sample results
An application (illustrated on pages 376-377 of textbook and by PowerPoints 9-22, 9-23, 9-24,
and 9-25)
Comparison of statistical sampling techniques for substantive tests
Audit Risk (Appendix 9B)
Comments and Observations
Chapter 9 attempts to present audit sampling in a way that the topic may be understood by the inexperienced
accounting student. For those of you that have already completed statistics courses, you will now see
practical applications of the methods that you learned. The text concentrates on sampling concepts that are
needed by most auditors, and avoids the extremely technical details that are more appropriate for the audit
sampling specialist.
One of the requirements of audit sampling is projecting the misstatement found in the sample to the
population, You should review the requirements of SAS No. 39, pay particular attention to the differences
between statistical and nonstatistical sampling. You may tend to equate random selection with statistical
sampling. It is important that you understand that random selection is simply a way to select a sample that
can be used for either statistical or nonstatistical sampling plans.
You should familiarize yourself with the sampling concepts of stratification, allowance for sampling
risk (previously referred to in the literature as precision) and sampling risk. You should have an
understanding of the effects of various factors on the required sample size.
A primary use of audit sampling is to test controls. All important sampling concepts are illustrated
with control testing applications, without having to deal with difficult mathematical formulas. The auditor
must adjust the allowance for sampling risk when the estimated standard deviation differs from that
subsequently obtained in the sample. Although many approaches are possible, the textbook adjusts the
allowance for sampling risk in a manner that maintains the risk of incorrect acceptance at its predetermined
level.
The textbook includes two appendices—one on probability-proportional-to-size sampling (PPS), and
one on audit risk. You should read these appendices but you will not be tested on them.