Document ID: chunk:federal_register_of_legislation:F2021C01255:body:0:p7
Version: federal_register_of_legislation:F2021C01255
Segment Type: other
Provision Reference: 
Character Range: 18027–20943

client, are not considered a misstatement.  Also, a misposting between customer accounts does not affect the total accounts receivable balance.  Therefore, it may not be appropriate to consider this a misstatement in evaluating the sample results of this particular audit procedure, even though it may have an important effect on other areas of the audit, such as the assessment of the risk of fraud or the adequacy of the allowance for doubtful accounts.

A7.             In considering the characteristics of a population, for tests of controls, the auditor makes an assessment of the expected rate of deviation based on the auditor's understanding of the controls or on the examination of a small number of items from the population.  This assessment is made in order to design an audit sample and to determine sample size.  For example, if the expected rate of deviation is unacceptably high, the auditor will ordinarily decide not to perform tests of controls.  Similarly, for tests of details, the auditor makes an assessment of the expected misstatement in the population.  If the expected misstatement is high, 100% examination or use of a large sample size may be appropriate when performing tests of details.

A8.             In considering the characteristics of the population from which the sample will be drawn, the auditor may determine that stratification or value-weighted selection is appropriate.  Appendix 1 provides further discussion on stratification and value-weighted selection.

A9.             The decision whether to use a statistical or non-statistical sampling approach is a matter for the auditor's judgement, however, sample size is not a valid criterion to distinguish between statistical and non-statistical approaches.

Sample Size (Ref: Para. 7)

A10.         The level of sampling risk that the auditor is willing to accept affects the sample size required.  The lower the risk the auditor is willing to accept, the greater the sample size will need to be.

A11.         The sample size can be determined by the application of a statistically-based formula or through the exercise of professional judgement.  Appendices 2 and 3 indicate the influences that various factors typically have on the determination of sample size.  When circumstances are similar, the effect on sample size of factors such as those identified in Appendices 2 and 3 will be similar regardless of whether a statistical or non-statistical approach is chosen.

Selection of Items for Testing (Ref: Para. 8)

A12.         With statistical sampling, sample items are selected in a way that each sampling unit has a known probability of being selected.  With non-statistical sampling, judgement is used to select sample items.  Because the purpose of sampling is to provide a reasonable basis for the auditor to draw conclusions about the population from which the sample is selected, it is important that the