Running head: UNDERSTANDING OF SAMPLING AND HOW THEY ARE USED 1
Understanding of Sampling and How They are Used
| Descriptions |
Operational Audit |
Compliance Audit | Financial Statement Audit |
| Define Audit Sampling | Inspections of the operations of a business or an organization with the intention to make improvements so that efficiency can be achieved. | Examination of an organization’s commitment and adherence to set regulations or terms that have been agreed upon. | Review of an organization’s financial statement to determine if the information provided complies with set criteria. |
| How to gather evidence, when and when not to apply sampling techniques. Use appropriate terminology | The process of collecting evidence in operational audits involves analysis of samples in product audits, interviews in the process and system audits and tests (DeBenedetti, 2017). Sampling is appropriate in product audits. | Evidence gathering procedures involve collecting product samples and interviewing managers. Sampling is carried out when auditing products. | Selective testing of statements in the best method of gathering evidence. The auditor determines if taking samples will reflect the whole system. |
| Description of attribute sampling | Taking a section of the whole operation process or the product from the operation and determining with it reflects the entire process. Used in measuring internal controls. | A section of the organization's processes is taken as a measure of the organization's compliance to set regulations | Part of the financial statements or part of the whole statements is selectively tested for compliance with set criteria. |
| Demonstrate nonstatistical sampling | Selection of test group by applying the individual judgment of the auditor to determine the representative group that will be used to test and improves the organization's operations. The items selected and evaluation method used also relies on the examiner’s judgment (Bragg, 2016). | Again the judgment of the examiner determines the sample size, test items and evaluation method to be used to test for compliance with set guidelines. | The auditor does not use statistical table or tools to determine the part of the financial statements to be audited or instead applies their judgment and comes up with an appropriate evaluation technique. |
| Describe sampling of internal controls, account balances and monetary units | In operational auditing sampling of internal controls is done by determining the operations that are of more significance to the operations of the organization and testing them for deviations from internal set standards. The procedure for sampling for account balance involves selecting specific items within an account balance or transactions for auditing. Sampling monetary units for improving operations is based on the separation of each unit like a dollar into its sample and determining whether the recording record keeping is effective. | A sampling of internal controls involves testing for compliance narrows on operations that are deemed non-compliant. Account balances sampling, on the other hand, selects items within the account that are tested for compliance. Monetary units are sampled by their value, and those with a higher value are likely to be selected for testing. | Financial statements are sampled for internal controls by selecting parts of the statements for testing for deviation from set controls in the organization. In account balances sampling, accounts in the financial statements are picked for auditing. In monetary units sampling, the accuracy of financial accounts is tested by treating each unit as a dollar as a sample and testing each unit in the account for accuracy. |
| Demonstrate non statistical sampling, classical variable and classic variable sample with difference estimation | Non statistical sampling is the selection of test group by applying the individual judgment of the auditor to determine the representative group that will be used to test and improves the organization's operations. A classical variable is a unit of the population that is treated as a sample. Classic variable sample with difference estimation involves comparison of the sample unit of the audit with the error (Chantis, 2012). | In non-statistical, the judgment of the examiner determines the sample size, test items and evaluation method to be used to test for compliance with set guidelines. A classic variable is an entry that is sampled individually and used to determine compliance. Classic variable sample with difference estimation each entry is treated as a sample and then compliance is tested by determining the range of error. | The auditor does not use statistical table or tools to determine the part of the financial statements to be audited or rather applies their judgment and comes up with an appropriate evaluation technique to gauge the accuracy of the statements. A variable sample, in this case, is an entry in financial statement which is taken as a sample. A classic variable sample with difference estimation is an entry that is used by the auditor to test for accuracy in financial statements by determining the audit value and then the error from that value. |
References
Bragg, S. (2016, April 21). Non-statistical sampling . AccountingTools. Retrieved on 17 January 2018, from https://www.accountingtools.com/articles/non-statistical-sampling.html
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Chantis, J. (2012). Difference estimation versus mean per unit methods for skewed population: a simulation study. Retrieved on 17 January 2018, from http://analytics.ncsu.edu/sesug/2012/SD-08.pdf.
DeBenedetti, J. (2017). An operational audit of the effectiveness of operations . Yourbusiness.azcentral.com . Retrieved on 17 January 2018, from https://yourbusiness.azcentral.com/operational-audit-effectiveness-operations-28796.html
