Audit Sampling For Substantive Tests: Cuyangoan, Rubilyn P. Gorero, Julamie D

AUDIT SAMPLING FOR
SUBSTANTIVE TESTS
Cuyangoan, Rubilyn P.
Gorero, Julamie D.
- concerned with amounts
- Its purpose is to obtain audit evidence to
detect material misstatements in the financial
statements
RISKS IN SUBSTANTIVE TESTS
1.NON- SAMPLING RISKS

2.SAMPLING RISKS
A. Risks of Incorrect Projection (ALPHA RISK)
- the risk that a sample supports the conclusion
that a recorded balance is materially
misstated when it is not.
B. Risks of Incorrect Acceptance (BETA RISK)
- the risk that a sample supports the conclusion
that a recorded accounted balance is not
materially misstated when the account is
actually materially misstated.
- sampling technique auditors use to estimate the
maximum amount of overstatement of a recorded
amount with measurable level of risk of making a
decision error.
- sometimes referred to as peso-unit sampling (PU) or
cumulative –monetary amount sampling (CMA).
1. It increases the likelihood of including high peso- value
items in the sample.
2. Allows auditors to compute the sample size and evaluate
the results by hand or by means of tables.
3. Easy to use.
4. Enables the auditor to state conclusion in a peso amount.
Disadvantages of PPS Sampling
1. The assumption that the audited value of a sampling unit is
neither less than zero nor greater than the book value may
not be consistent with the auditor’s objective.
2. Negative balance or zero balances cannot be audited using
PPS Sampling.
3. When misstatements are found using PPS sampling, the
upper misstatement limit may be too high to be useful.
- use normal distribution theory to evaluate selected
characteristics of a population on the basis of a
sample of items constituting the population.
1. Mean- per- unit- estimation
- projects the sample average to the total population
by multiplying the sample average by the number of
items in the population.
2. Difference Estimation
- uses the average difference between audited
amounts and individual recorded amounts to
estimate the total audited amount of a population
and allowance for sampling.
3. Ratio Estimation
- uses the ratio of audited amounts to recorded
amounts in the sample to estimate the total peso
amount of the population and an allowance for
sampling risk.
4. Regression Approach
- has the effect of using the both the average ratio
and the average difference in calculating an estimate
of the total amount for the population.
5. Difference and Ratio Estimation
- used as alternatives to mean-per-unit estimation.
6. Stratification
- separates a population into relatively homogeneous
groups to reduce the sample size by minimizing the
effect of variation of items in the population.
STEPS IN VARIABLE SAMPLING FOR
SUBSTANTIVE TESTS
1.Determine the objective/s of the test.

2.Define population and sampling unit.
3.Determine the initial sample size.
4. Using random sampling techniques to identify the
actual items to audit.
5. Audit the selected items and identify
misstatements.
6. Evaluate the sample results.
7. Document the sampling procedure.
Reaching a Conclusion in PPS Sampling
- Must consider not only the statistical results but also the
qualitative aspects of the findings.
- If the audit of the sample and other evidence supported
the financial statement assertion, the auditor generally
concludes that the assertion is fairy stated.
Reaching a Conclusion in PPS Sampling
- if the auditor finds that the upper misstatement limit
exceeds tolerable amount the auditor could:
a. Examine additional logical units from the population
b. Perform additional substantive tests
c. Have the client correct the errors found, reduce the upper
misstatement limit, and compare the revised with the
tolerable error.
Non statistical Sampling for Substantive Tests
- The auditor may decide not to quantify the factors used to
arrive at the sample size
- In evaluating the sample results, the auditor also project the
misstatement found in the sample to the population and
consider the sampling risk, but the level of risk is not
quantified.
QUESTIONS??
ASSESSMENT TASK
TRUE OR FALSE
1.ALPHA RISK is the risk that a sample supports the conclusion

that a recorded balance is materially misstated when it is
not.
2. Classical Variables Sampling is sampling technique
auditors use to estimate the maximum amount of
overstatement of a recorded amount with
measurable level of risk of making a decision error.
3. Probability- proportional-to- size sampling
techniques use normal distribution theory to evaluate
selected characteristics of a population on the basis
of a sample of items constituting the population.
IDENTIFICATION
4. It separates a population into relatively
homogeneous groups to reduce the sample size by
minimizing the effect of variation of items in the
population.
IDENTIFICATION
5. Its purpose is to obtain audit evidence to

detect material misstatements in the financial
statements.
KEY ANSWERS
1. True
2. False
3. False
4. Stratification
5. Substantive procedures

Audit Sampling For Substantive Tests: Cuyangoan, Rubilyn P. Gorero, Julamie D

Uploaded by

Copyright:

Available Formats

Audit Sampling For Substantive Tests: Cuyangoan, Rubilyn P. Gorero, Julamie D

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Audit Sampling For Substantive Tests: Cuyangoan, Rubilyn P. Gorero, Julamie D

Uploaded by

Copyright:

Available Formats

AUDIT SAMPLING FOR

1.NON- SAMPLING RISKS

1.Determine the objective/s of the test.

1.ALPHA RISK is the risk that a sample supports the conclusion

5. Its purpose is to obtain audit evidence to

You might also like