IV. Forming Conclusions and Reporting

Question 1

When testing for completeness why would you not start at the F/S?

Answer 1

You start at the F/S when testing for existence and accuracy, not completeness. When testing for completeness, you start at the supporting evidence, not the F/S. So one place to start is the board meeting minutes especially when searching for material debt documents which will need to be approved by the board.

Question 2

Why would an auditor use variable sampling to determine the inventory qualities on hand?

Answer 2

Companies have more inventory items than can be reasonably examined. So auditors employ variable sampling to sample and then extrapolate an amount to estimate the quantity. This is classic variable sampling.

Question 3

Why would an auditor use attribute sampling to determine the completeness of billing transactions?

Answer 3

Attribute sampling is used to test controls and is used to determine things like rate of occurrence or a quality of a characteristic in a population (is the account balance complete).