Reference no: EM132368749
Topic - Sampling and overview of the risk response phase of the audit
On completing the learning activities associated with this topic you should be able to
1. Explain the difference between sampling and non-sampling risk.
2. Differentiate between statistical and non-statistical sampling.
3. Decide the factors that influence the sample size when testing controls and when conducting substantive testing.
4. Outline how to evaluate the results of tests conducted on a sample.
Reading guide - References: Moroney, Campbell and Hamilton, Chapter 7.
Standards:
ASA 330: The Auditor's Responses to Assessed Risks
ASA 530: Audit Sampling
Review questions:
1. Why do auditors use sampling? Explain the advantages and disadvantages of using sampling instead of testing every item in the population.
2. Explain the difference between tests of controls and substantive procedures.
3. Why non-sampling risk does exist for all types of tests in all audits? Explain.
4. Why are audit tests more likely to be conducted at or after year-end for high-risk clients than for low-risk client? Explain.
5. How are the results of tests of controls related to decisions about the nature, timing and extent of substantive procedures?
6. How is test data used to gather evidence about the effectiveness of controls? Why is it likely to be a more effective audit test than reading client procedure manuals?