Contents
- 1 How can an auditor reduce sampling risk?
- 2 What can a public accounting firm do to reduce the Nonsampling risk?
- 3 Why do auditors sample instead of examining every transaction?
- 4 How do we reduce sampling risk?
- 5 Which is an example of non sampling risk?
- 6 What should be considered when designing an audit sample?
How can an auditor reduce sampling risk?
Auditors can lower the sampling risk by increasing the sampling size. Although there are many types of risks associated with the audit process, each type primarily has an effect on the overall audit engagement.
What is Nonsampling risk and how can it be eliminated?
Non-sampling risk can be eliminated by proper engagement planning, supervision, and review. Non-sampling risk arises from the possibility that the auditor’s conclusion, based on a sample may be different from the conclusion reached if the entire population were subjected to the same audit procedure.
What can a public accounting firm do to reduce the Nonsampling risk?
Public accounting firms attempt to minimize non-sampling risk by :
- Implementing good quality control practices of hiring, training, and supervising competent personnel,
- Carefully designing audit program procedures, and.
- Assigning appropriately qualified auditors to each audit.
Why do auditors use sampling?
Audit sampling enables auditors to make conclusions and express fair opinions based on predetermined objectives without having to check all of the items within financial statements. The auditors will only verify selected items, and through sampling, can infer their opinion on the entire population of items.
Why do auditors sample instead of examining every transaction?
Due to size and complexity of an entity auditors may find that it is not economical to test every transaction, so instead they select and evaluate a representative sample that is used to provide a reasonable basis for conclusions about the entire population of transactions. You just studied 40 terms!
How do we reduce non-sampling risk?
Non-sampling risk can be reduced by increasing auditor competence and enhancing supervision of staff. A high level of audit planning and review can minimize the amount of nonsampling risk. Examples of nonsampling risk are: Applying inappropriate audit procedures.
How do we reduce sampling risk?
Carefully selected sample will decrease the rate of sampling risk. Increase in sample will reduce the sampling risk. But increase in the sample size will affect the overall efficiency of the audit.
How can auditors control and measure sampling risk?
Auditors can control and measure the sampling risk if the statistical sampling is used in determining sample size and selecting the sample items. In this case, auditors can measure how much the risk they face and control it by either increase or decrease sample size to have a reasonable low risk.
Which is an example of non sampling risk?
Non-sampling risk is the risk that the auditor forms the wrong conclusion, which is unrelated to sampling risk. An example of such a situation would be where the auditor adopts inappropriate audit procedures, or does not recognise a control deviation.
Can a sampling risk lead to an erroneous conclusion?
ISA 530 recognises that sampling risk can lead to two types of erroneous conclusion: The auditor concludes that controls are operating effectively, when in fact they are not.
What should be considered when designing an audit sample?
When designing an audit sample, the auditor shall consider the purpose of the audit procedure and the characteristics of the population from which the sample will be drawn. (Ref: Para. A4–A9) 7. The auditor shall determine a sample size sufficient to reduce sampling risk to an acceptably low level. (Ref: Para. A10–A11) 8.