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ACCA Applied Skills · Audit and Assurance

Audit Sampling and Other Means of Testing for ACCA AA

Audit sampling means applying audit procedures to less than 100% of items in a population so the auditor can conclude on the whole population. You define the population, choose a selection method, test the items, project errors and compare them with tolerable error. Other means of testing include inspection, observation, inquiry, confirmation, recalculation, reperformance and analytical procedures.

What this chapter covers

This chapter covers how auditors gather evidence when they cannot, or need not, check every item. It starts with the idea of sampling and the risks that come with it. It then moves through the ways of picking items, how to design a sample and judge the results, and what to do when you select items without sampling. It ends with the procedures auditors use to collect evidence.

The chapter links to the rest of the AA paper. Risk assessment decides how much evidence you need. Tests of controls and substantive procedures are where sampling is applied. Evidence and the audit report depend on what the tests find. If you understand this chapter, the audit process and evidence questions become much easier.

In the exam, the content appears in both objective and written questions. Section A and the OT cases test definitions, sampling risk, selection methods and the name of a procedure. Section B written questions ask you to suggest procedures for a scenario, explain a sampling approach or say what to do about errors found. You need both quick recall and clear written answers.

Almost every audit scenario ends with the question "what procedures would you perform?" Sampling and procedure types are the toolkit for that answer. Objective questions on this chapter are often short and can be won with exact definitions, as the marking is all or nothing. Written questions reward you for linking the procedure to the specific assertion and risk in the scenario. Students who learn the terms and practise matching procedures to risks gain marks across the whole paper, not just in this chapter.

Audit sampling and other means of testing: topics in the order to study them

  1. 1Audit Sampling Concepts and RiskStart here because it defines sampling, population, sampling risk and non-sampling risk, which every later topic uses.
  2. 2Sample Selection MethodsOnce you know why sampling is used, learn how items are picked: random, systematic, monetary unit, haphazard and block selection.
  3. 3Designing Samples and Evaluating ResultsThis needs the earlier terms, and it covers sample size factors, tolerable error, errors found and projecting results.
  4. 4Selecting Items for Testing Without SamplingLearn it after sampling so you can compare it: testing all items, specific items and key items are not sampling.
  5. 5Other Means of Testing: Audit ProceduresFinish with the full list of procedures, then practise choosing the right one for a given assertion or risk.

How to prepare Audit sampling and other means of testing

Aim for firm definitions first, then application to scenarios. Practise short objective questions and then a few written answers.

  1. Learn the key terms in your own words: population, sampling unit, sampling risk, non-sampling risk, tolerable error and anticipated error.
  2. Compare the selection methods in a short list, noting how each works and when it suits. Be clear that haphazard and block selection are not statistically valid.
  3. Work out the factors that make a sample larger or smaller, such as higher assessed risk, lower tolerable error or a larger expected error.
  4. Practise what to do when an error is found: decide if it is anomalous, extend testing, project the error and compare it with tolerable error.
  5. Write a table of audit procedures with an example of each, and link each to an assertion such as existence, completeness or valuation.
  6. Do timed objective questions on this chapter, then write two or three procedure-based answers using scenario details rather than generic lists.
  7. Review every wrong answer and note whether the cause was a term, a method or a misread scenario.

Common mistakes in Audit sampling and other means of testing

  • Saying a larger sample removes all risk

    Fix: State that a bigger sample reduces sampling risk only. Non-sampling risk comes from auditor error and poor procedures.

  • Treating haphazard selection as random selection

    Fix: Remember that random selection uses a method such as random number tables or generators. Haphazard selection relies on judgement and can be biased.

  • Calling specific item selection a type of sampling

    Fix: Sampling requires a representative result for the whole population. Items chosen for their value or risk give results only for those items.

  • Listing generic procedures in a written answer

    Fix: Name the specific document, balance or control in the scenario, state the procedure and say what assertion it addresses.

  • Ignoring an error because it is small

    Fix: Compare the projected error with tolerable error. Only treat an error as anomalous if you can show it is not representative.

  • Mixing up inquiry and confirmation or reperformance and recalculation

    Fix: Learn one example each. Confirmation comes from a third party. Recalculation checks arithmetic. Reperformance repeats a procedure or control.

Last-day revision: Audit sampling and other means of testing

  • Audit sampling is applying procedures to less than 100% of a population so every item has a chance of selection.
  • Sampling risk is the risk that the conclusion from the sample differs from testing the whole population.
  • Non-sampling risk comes from things like using the wrong procedure or misreading evidence. A larger sample does not reduce it.
  • Tolerable error is the maximum error the auditor will accept in the population.
  • A higher assessed risk or lower tolerable error means a larger sample.
  • Random selection gives every item an equal chance. Systematic selection uses a fixed interval from a start point.
  • Monetary unit sampling gives larger-value items a higher chance of selection.
  • Haphazard and block selection are not statistically based, so use them with care.
  • Testing all items, selecting specific items and selecting key items are not audit sampling.
  • If you find an error, consider whether it is anomalous, then project it across the population.
  • Procedures: inspection, observation, inquiry, external confirmation, recalculation, reperformance and analytical procedures.
  • Match the procedure to the assertion: for example, confirmation helps with existence of receivables.

Audit sampling and other means of testing in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Audit sampling and other means of testing: frequently asked questions

Is audit sampling tested in the objective questions or the written questions?

Both. Objective questions often test definitions, risks and selection methods. Written questions usually ask for procedures or comments on a sampling approach in a scenario.

What is the difference between sampling risk and non-sampling risk?

Sampling risk is the chance that the sample leads to a different conclusion from testing the whole population. Non-sampling risk covers all other causes of wrong conclusions, such as choosing an inappropriate procedure. Only sampling risk falls as the sample grows.

Do I need to calculate sample sizes?

You should know the factors that affect sample size and how they move it. Be ready for simple calculations such as a systematic selection interval, which is the population size divided by the sample size.

How do I choose the right audit procedure in a scenario?

Identify the balance or control, the risk and the assertion at stake. Then choose the procedure that gives the most reliable evidence for it. Say exactly what you would do and what you expect to find.