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AUDIT EVIDENCE AND SAMPLING - Coggle Diagram
AUDIT EVIDENCE
AND SAMPLING
evidence
what?
information used by the auditor to determine whether the entity or data has met the established criteria or objectives, and whether it supports the audit conclusions or not
evidence sources
auditors' observations
notes from interviews
information from correspondence or other documentation
Results of an audit test
Ways to determine if the evidence is reliable
independence of the evidence provider
qualifications of the person providing the evidence
objective of- the evidence
timing of the evidence
Methods of gathering evidence
reviewing IS organization structures
reviewing IS policies and procedures
reviewing IS standards
reviewing IS documentation
Personnel interviews
characteristics that determine the
persuasiveness of evidence
Competence (Reliability)
Sufficiency
audit evidence
what?
information or data that use or collect by auditors as part their audit works to conclude their opinion on whether financial statements are prepared in all material respect and in accordance with the applicable financial frameworks
audit evidence decisions
Items to select
Sample size
Timing
Types
Physical examination / inspection of tangible assets
Confirmation
Inspection of documentation
Observation
Inquiries of the client
Recalculation
Reperformance – vouching and tracing
Analytical procedures
Audit Sampling
what?
application of an audit procedure to less than 100% of the items within an account balance or class of transactions for the purpose of drawing a general conclusion about the account balance or the entire group of transactions based on the characteristics detected in the sample
when to use?
when it is not efficient to review 100% of
the records.
if records are missing
other circumstances make reviewing all of the records difficult
sample
representative sample
non-representative
Sampling risk
Non-sampling risk
characteristic
Precision
Reliability
Steps in the Sampling Process
Planning the Sample
State the objectives of the audit test.
Decide whether audit sampling applies.
Define attributes and exception conditions
Define the population.
Define the sampling unit.
Select the Sample and Perform the Tests
Specify the tolerable exception rate.
Specify the acceptable risk of assessing control risk too low.
Estimate the population exception rate
Determine the initial sample size
Evaluate the Results
Select the sample
Perform the audit procedures
Generalize from the sample to population.
Analyze exceptions.
Decide the acceptability of the population.
Sampling Risk
in Attribute Sampling
Risk of Underreliance
Control Risk Too High
Risk of Overreliance
Control Risk Too Low
in Variables Sampling
Risk of Incorrect Rejection
Risk of Incorrect Acceptance