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CMA Intermediate · Corporate Accounting and Auditing · Audit Sampling, Audit Techniques and Analytical Procedure

While testing payment authorisation on a sample of cheques, an auditor selects a cheque that has been properly cancelled and so is not a deviation. Under SA 530, what should the auditor do?

The auditor should perform the procedure on an appropriately chosen replacement item. SA 530 gives the cancelled cheque as its example: if it is properly cancelled and not a deviation, the procedure is not applicable to it, so a replacement is examined.

  1. ATreat it as a deviation and extrapolate it to the population
  2. BPerform the procedure on an appropriately chosen replacement itemCorrect
  3. CIgnore it and reduce the sample size by one
  4. DReplace the whole sample with a larger judgemental sample

Explanation

SA 530 says that if the procedure is not applicable to the selected item, the auditor performs it on a replacement item. Its example is a cancelled cheque selected when testing payment authorisation. If satisfied that it is properly cancelled and not a deviation, an appropriately chosen replacement is examined.

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