AUDIT SAMPLING – ISA 530
Monetary Unit Sampling
The population is divided into monetary units - i.e. the rand units the total
account balance consists of;
A sample unit is identified - as an individual monetary unit, i.e. an
individual rand.
After the rand value has been selected - it is traced to the physical item
(such as invoice/account) that contains the particular monetary unit,
By means of a column - with accumulated values of the relevant individual
account balances or transactions.
Applicability
MUS focuses on high-value items - in other words where there is a bigger
probability of material overstatement.
MUS will be applicable because:
- trade debtors is an asset - and the primary risk is thus overstatement;
- a computerized database of debtors is available;
- there are no nil or negative balances in the debtors' ledger;
- As it focuses on larger debtors' balances - it gives the advantage of
smaller samples which leads to increased effectiveness.
MUS: advantages
especially for overstatement testing
all items >interval will be selected
focus on high value items-> bigger chance on selection
bigger chance for reasonable errors
smaller sample
MUS: disadvantages
• doesn’t test for understatement or
• zero or negative values
BENEFITS OF AUDIT SAMPLING
More cost-effective audit.
, Time saving when performing audit.
More representative tests being performed.
More focused test being performed.
USE OF PROFESSIONAL JUDGEMENT IN AUDIT SAMPLING
Auditor is still required to exercise his/her judgement - irrespective of
whether statistical sampling is used.
Auditor uses judgement when planning the sample in determining:
- The sampling unit
- Acceptable error percentage
- The expected error percentage
- In determining the confidence level
- Determining the definition of the error.
Professional judgement is also used - in determining which selection
method is to be used.
In systematic sampling - the first selection between 1 and the interval is
selected using professional judgement.
2 situations where judgement in not used is when:
- The sample size
- Extrapolation of the results of the sample to the population
Even if the expected error is extrapolated over the population - The
auditor must still use his/her judgement to evaluate the error and make a
conclusion.
UNSATISFACTORY SAMPLING RESULTS
Unsatisfactory result - if the estimated population error of 5% exceeds the
acceptable error percentage of 3%. (Population Error > Tolerable Error)
Consequences of Unsatisfactory Results in:
Inspect DNs for clients signature as proof of delivery
– Problems may exist with the debtors are year-end if debtors questions
their outstanding debt and no evidence of delivery can be presented
by ZYX Limited.
Monetary Unit Sampling
The population is divided into monetary units - i.e. the rand units the total
account balance consists of;
A sample unit is identified - as an individual monetary unit, i.e. an
individual rand.
After the rand value has been selected - it is traced to the physical item
(such as invoice/account) that contains the particular monetary unit,
By means of a column - with accumulated values of the relevant individual
account balances or transactions.
Applicability
MUS focuses on high-value items - in other words where there is a bigger
probability of material overstatement.
MUS will be applicable because:
- trade debtors is an asset - and the primary risk is thus overstatement;
- a computerized database of debtors is available;
- there are no nil or negative balances in the debtors' ledger;
- As it focuses on larger debtors' balances - it gives the advantage of
smaller samples which leads to increased effectiveness.
MUS: advantages
especially for overstatement testing
all items >interval will be selected
focus on high value items-> bigger chance on selection
bigger chance for reasonable errors
smaller sample
MUS: disadvantages
• doesn’t test for understatement or
• zero or negative values
BENEFITS OF AUDIT SAMPLING
More cost-effective audit.
, Time saving when performing audit.
More representative tests being performed.
More focused test being performed.
USE OF PROFESSIONAL JUDGEMENT IN AUDIT SAMPLING
Auditor is still required to exercise his/her judgement - irrespective of
whether statistical sampling is used.
Auditor uses judgement when planning the sample in determining:
- The sampling unit
- Acceptable error percentage
- The expected error percentage
- In determining the confidence level
- Determining the definition of the error.
Professional judgement is also used - in determining which selection
method is to be used.
In systematic sampling - the first selection between 1 and the interval is
selected using professional judgement.
2 situations where judgement in not used is when:
- The sample size
- Extrapolation of the results of the sample to the population
Even if the expected error is extrapolated over the population - The
auditor must still use his/her judgement to evaluate the error and make a
conclusion.
UNSATISFACTORY SAMPLING RESULTS
Unsatisfactory result - if the estimated population error of 5% exceeds the
acceptable error percentage of 3%. (Population Error > Tolerable Error)
Consequences of Unsatisfactory Results in:
Inspect DNs for clients signature as proof of delivery
– Problems may exist with the debtors are year-end if debtors questions
their outstanding debt and no evidence of delivery can be presented
by ZYX Limited.
