Week 5

Question 1

What’s the two main purposes of audit documentation?

Answer 1

• Provide proof that the audit was planned and performed according to ISAs and other regulatory requirements
• Provide evidence that forms the basis of the auditor’s opinion

Question 2

Name 2 other purposes for audit documentation

Answer 2

• Assists in planning/performing audit
• For supervision and review purposes
• Holds engagement team accountable for their work
• Record retained for future audits to reference
• Enables quality control reviews and inspections to be carried out

Question 3

As an auditor, what and how should you test figures from the finanical statements?

Answer 3

• Select specific items
• Audit sampling

Question 4

When would it be appropriate to select all items to test all items?

Answer 4

• Low amount of things to test
• Risk of misstatement on these items
• The repetitive nature of the calculation makes a 100% examination cost-effective

Question 5

Name 2 criteria on how an auditor selects specific items

Answer 5

• High value and key items
• All items over a certain amount
• Items to obtain information

Question 6

What’s a sampling risk?

Answer 6

Auditors conclusion based on sample tested may be different than if whole population was tested.

Sufficient sample size necessary and selected in a way to reduce bias.

Question 7

What’re the 2 types of sampling methods?

Answer 7

Statistical and non-statistical sampling.

Question 8

What’s the 3 types of statistical sampling?

Answer 8

• Random selection
• Systematic selection
• Monetary unit selection

Question 9

What’s systematic selection?

Answer 9

• A constant sampling interval is selected from a starting point e.g. select every 20th item in a list
• Need to make sure that items in the population are not organized in a structured way i.e. highest to lowest

Question 10

What’s monetary unit selection?

Answer 10

• Select items based upon monetary values
• Used in conjunction with a random number generator

Question 10

What’re the steps to monetary unit selection?

Answer 10

Step 1 - Calculate the sampling interval.

Population / Sample Size

Step - 2
- Select a random start point

Step 3
- Using cumulative amounts select each item that falls at each X interval after the initial starting point - repeat until X times have been done

Question 11

Name 2 methods of non-statistical sampling

Answer 11

• Haphazard selection
• Block selection

Question 12

What’s haphazard selection?

Answer 12

Auditor choose selection by random.

Question 13

What’s block selection?

Answer 13

A block of items next to each other in a list are selected.

Question 14

What’s a deviation?

Answer 14

Any issue identified whilst testing.

Sample = 30
Errors = 10

Deviation Rate = 33%