TopicE-3 AuditSamplingandOtherMeansofTesting
發(fā)布時間：2014-02-26 共2頁
（B-Q5/D2006）
（a） （ⅰ） In the context of ISA530 Audit Sampling and Other Means of Testing , explain and provide examples of the terms ‘sampling risk’ and ‘non-sampling’ risk. （4 marks）
（ⅱ） briefly explain how sampling and non-sampling risk can be controlled by the audit firm. （2 marks）
（b） Tam Co, is owned and managed by two brothers with equal shareholdings. The company specializes in the sale of expensive motor vehicles. Annual revenue is in the region of $70,000,000 and the company requires an audit under local legislation. About 500 cars are sold each year, with an average value of $140,000, although the range of values is from$130,000 to $160,000.invoices are completed manually with one director signing all invoices to confirm the sales value is correct. All accounting and financial statement preparation is carried out by the directors. recent expansion of the company’s showroom was financed by bank loan, repayable over the next five years.
The audit manager is starting to plan the audit of Tam Co. The audit senior and audit junior assigned to the audit are helping the manager as training exercise.
Comments are being made about how to select sample of sales invoices for testing. Audit procedures are needed to ensure that the managing director has signed them and then to trace details into the sales day book and sales ledger.
“we should check all invoices” suggests the audit manager.
“How about selecting sample using statistical sampling techniques” adds the audit senior.
“Why waste time obtaining sample?” asks the audit junior. He adds “taking random sample of invoices by reviewing the invoice file and manually choosing few important invoices will be much quicker.”
Required:
Briefly explain each of the sample selection methods suggested by the audit manager, audit senior and audit junior, and discuss whether or not they are appropriate for obtaining representative representative sample of sales invoices. （9marks）
（c） Define ‘materiality’ and explain why the auditors of Tam Co must form an opinion on whether the financial statements are free from material misstatement. （5marks）
（20marks）
答案：
（a） Sampling risk
Sampling risk is the possibility that the auditor’s conclusion, based on sample, may be different from the conclusion reached if the entire population were subjected to the audit procedure.
The auditor may conclude from the results of testing that either material misstatements exist, when they do not , or that material misstatements do not exist when in fact they do .
Sampling risk is controlled by the audit film ensuring that it is using valid method of selecting items from population and/or increasing the sample size.
Non-sampling risk
Non-sampling risk arises from any factor that causes an auditor to reach an incorrect conclusion that is mot related to the size of the sample.
Examples of non-sampling risk include the use of inappropriate procedures, Misinterpretation of evidence or auditor simply “missing” an error.
Non-sampling risk is controlled by providing appropriate training for staff so they know which audit techniques to use and will recognize an error when one occurs.
（b）The audit manager suggests checking all invoices, effectively ignoring any statistical sampling; in other words this is not Tam because:
— The population is relatively small and it is likely to be quicker to test all the items than spend time constructing sample.
— All the transactions are mot large but could be considered material in their own right , e.g. compared to project . As all the transactions are material, then they all need to be tested.
The audit senior suggests using statistical sampling. This will mean selecting limited number of sales invoices from the population using probability theory ensuring random selection of the sample and then applying audit tests to those invoices only. This approach may be appropriate because:
— The population consists of similar items （i.e. it is homogeneous）and there are no indications of the control system failing or changing during the year. There is the query about how long it will take to determine and produce sample, which may make statistical sampling inappropriate in this situation.
The audit junior suggests using “random” sampling, which the junior auditor appears to understand ad manually choosing which invoices to look at. The approach therefore involves an element of bias and is mot statistical or true “random” sampling.
— The sample selected will not be chosen “randomly” but on the whim of the auditor. Human nature will tend to avoid difficult items for testing.
— Also, as invoices will not have been chosen using statistical sampling, no valid conclusion can be drawn from the results of the test. If an error is found if will be difficult extrapolating that error on to the population.
（c） Information is material if its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements.
Materiality depends on the size of the item or error judged in the particular circumstances of its omission or misstatement.
It is important that the auditors of Tam ensure that the financial statements are free from material error for the following reasons;
— There is legal requirement to audit financial statements and present an opinion on those financial statements. if the auditors do not detect material error then their opinion on the financial statements could be incorrect
— There are only two owner/directors who will be the initial users of the financial statements. While the owners/directors maintain the accounting records, the directors will want to know if there are material errors resulting from any mistakes they may have made; the auditor has responsibility to the members to ensure that the financial statements are materially correct
— There are also other users of the financial statements who will include the taxation authorities and the bank who have made loan to the company. They will want to see“true and fair”accounts. The auditors must therefore ensure that the financial statements are free from material misstatement to avoid any legal liability to third parties if they audit the financial statements negligently.
（a） （ⅰ） In the context of ISA530 Audit Sampling and Other Means of Testing , explain and provide examples of the terms ‘sampling risk’ and ‘non-sampling’ risk. （4 marks）
（ⅱ） briefly explain how sampling and non-sampling risk can be controlled by the audit firm. （2 marks）
（b） Tam Co, is owned and managed by two brothers with equal shareholdings. The company specializes in the sale of expensive motor vehicles. Annual revenue is in the region of $70,000,000 and the company requires an audit under local legislation. About 500 cars are sold each year, with an average value of $140,000, although the range of values is from$130,000 to $160,000.invoices are completed manually with one director signing all invoices to confirm the sales value is correct. All accounting and financial statement preparation is carried out by the directors. recent expansion of the company’s showroom was financed by bank loan, repayable over the next five years.
The audit manager is starting to plan the audit of Tam Co. The audit senior and audit junior assigned to the audit are helping the manager as training exercise.
Comments are being made about how to select sample of sales invoices for testing. Audit procedures are needed to ensure that the managing director has signed them and then to trace details into the sales day book and sales ledger.
“we should check all invoices” suggests the audit manager.
“How about selecting sample using statistical sampling techniques” adds the audit senior.
“Why waste time obtaining sample?” asks the audit junior. He adds “taking random sample of invoices by reviewing the invoice file and manually choosing few important invoices will be much quicker.”
Required:
Briefly explain each of the sample selection methods suggested by the audit manager, audit senior and audit junior, and discuss whether or not they are appropriate for obtaining representative representative sample of sales invoices. （9marks）
（c） Define ‘materiality’ and explain why the auditors of Tam Co must form an opinion on whether the financial statements are free from material misstatement. （5marks）
（20marks）
答案：
（a） Sampling risk
Sampling risk is the possibility that the auditor’s conclusion, based on sample, may be different from the conclusion reached if the entire population were subjected to the audit procedure.
The auditor may conclude from the results of testing that either material misstatements exist, when they do not , or that material misstatements do not exist when in fact they do .
Sampling risk is controlled by the audit film ensuring that it is using valid method of selecting items from population and/or increasing the sample size.
Non-sampling risk
Non-sampling risk arises from any factor that causes an auditor to reach an incorrect conclusion that is mot related to the size of the sample.
Examples of non-sampling risk include the use of inappropriate procedures, Misinterpretation of evidence or auditor simply “missing” an error.
Non-sampling risk is controlled by providing appropriate training for staff so they know which audit techniques to use and will recognize an error when one occurs.
（b）The audit manager suggests checking all invoices, effectively ignoring any statistical sampling; in other words this is not Tam because:
— The population is relatively small and it is likely to be quicker to test all the items than spend time constructing sample.
— All the transactions are mot large but could be considered material in their own right , e.g. compared to project . As all the transactions are material, then they all need to be tested.
The audit senior suggests using statistical sampling. This will mean selecting limited number of sales invoices from the population using probability theory ensuring random selection of the sample and then applying audit tests to those invoices only. This approach may be appropriate because:
— The population consists of similar items （i.e. it is homogeneous）and there are no indications of the control system failing or changing during the year. There is the query about how long it will take to determine and produce sample, which may make statistical sampling inappropriate in this situation.
The audit junior suggests using “random” sampling, which the junior auditor appears to understand ad manually choosing which invoices to look at. The approach therefore involves an element of bias and is mot statistical or true “random” sampling.
— The sample selected will not be chosen “randomly” but on the whim of the auditor. Human nature will tend to avoid difficult items for testing.
— Also, as invoices will not have been chosen using statistical sampling, no valid conclusion can be drawn from the results of the test. If an error is found if will be difficult extrapolating that error on to the population.
（c） Information is material if its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements.
Materiality depends on the size of the item or error judged in the particular circumstances of its omission or misstatement.
It is important that the auditors of Tam ensure that the financial statements are free from material error for the following reasons;
— There is legal requirement to audit financial statements and present an opinion on those financial statements. if the auditors do not detect material error then their opinion on the financial statements could be incorrect
— There are only two owner/directors who will be the initial users of the financial statements. While the owners/directors maintain the accounting records, the directors will want to know if there are material errors resulting from any mistakes they may have made; the auditor has responsibility to the members to ensure that the financial statements are materially correct
— There are also other users of the financial statements who will include the taxation authorities and the bank who have made loan to the company. They will want to see“true and fair”accounts. The auditors must therefore ensure that the financial statements are free from material misstatement to avoid any legal liability to third parties if they audit the financial statements negligently.
