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CS Professional · Compliance Management, Audit and Due Diligence · Audit Principles and Techniques

An auditor of Sundaram Foods Ltd tests a sample of 60 sales invoices from a population of 8,000 and, based on the results, concludes about the whole population of invoices. Which statement best describes the purpose of audit sampling as stated in SA 500?

Audit sampling is designed to enable the auditor to draw conclusions about an entire population from testing a sample drawn from it. It does not remove the need for risk assessment, nor does it guarantee the untested items are free of misstatement. Details are covered in SA 530.

  1. AIt enables conclusions to be drawn about an entire population on the basis of testing a sample drawn from itCorrect
  2. BIt replaces the need to assess risks of material misstatement
  3. CIt guarantees that no misstatement exists in the unsampled items
  4. DIt is a technique used only for tests of controls and never for details

Explanation

SA 500 states audit sampling is designed to enable conclusions to be drawn about an entire population on the basis of testing a sample drawn from it. It does not eliminate risk assessment or guarantee absence of misstatement. SA 500 refers to both tests of controls and tests of details in selecting items.

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