|Auditing through Sample Techniques|
Now a day auditing is going to be tough as huge and bulky transactions are carried out by clients so the auditors have to be careful because there is a time limit for completing the audit assignments as well as they have to take care about quality also and prove their professional efficiency.
In today's auditing environment, the auditor seldom performs audit tests on all items in an account balance or class of transactions for the purpose of evaluating some characteristic of the population. Consequently, the evidential matter obtained for an account balance or class of transaction is based upon the reasoning that the characteristics found in a representative sample of a population are reasonably accurate reflections of the characteristics to be found in the whole of that population.
Volume and value of the transactions carried out by the client.
Internal Control in the company on its day to day transactions.
Procedures adopted by client to complete the day to day transactions.
Time lag in completion of work by each and every department involving other department help also.
Determining the basic limits of transaction by its nature and value.
The best way in collection of sample data for audit purpose from client business is done through some techniques which is called Auditing techniques through sampling. There are five primary tasks that auditors undertake when performing audit sampling and testing procedures:
The preparation of the audit testing plan includes the identification of the population to be tested, the definition of what comprises an exception, and the determination of the sample size.
2. Selection of the items to be tested:-
Consideration of one of the following methods of selection will determine which items in the population are to be selected for examination:
» A survey is a technique for gathering specific information, through a questionnaire, from a group of transactions, representative of the larger transactions from client side. The responses to the questionnaire generated for transactions are analyzed and projected to the whole transaction trail. Surveys can be used both at the planning (for identifying issues or key concerns in an issue) as well as execution phases of performance audit (for providing necessary evidence).
» There are different ways in which a statistical sample can be selected. The most frequently used method is random selection where each item in the transactions has a equal chance of selection. Simple random sampling ensures that every transaction has an equal chance of selection. Though simple to administer, the underlying assumption is that the transaction is of same characteristics. In cases where the transaction is of not the same characteristics, a stratified sampling would be a better option. Here the transactions are sub-divided into same characteristics groups and then a random sampling is done on the groups, ensuring a better representative sample. Each sampling method has its practical use and limitation. The auditor uses his judgment in determining which kind of sampling is best suited to his audit job. It is advisable to take expert advice in judging the most suitable method.
Cluster sampling where the transactions are divided into clusters and transactions form each cluster are selected randomly. This is useful when the transactions can be easily divided into clusters.
Multi-stage sampling, which is sampling through a series of stages. This may combine the various single-stage sampling methods, e.g., simple, stratified, systematic, cluster sampling, at different stages. With volume of large transactions it is often useful to carry out sampling in two or more stages.
Following selection of the items, the auditor performs the relevant audit procedure (s) on those items. Any exceptions (which, in the case of tests of control are control deviations and in the case of substantive procedures are misstatements) are noted for subsequent evaluation.
The auditor evaluates the nature and extent of exceptions found in both the key items and other items selected for the purpose of estimating the actual level of exceptions that exist in the total population. This requires firstly:
The formation of a conclusion on the work performed requires a comparison of the tolerable level of exceptions with the actual level of exceptions estimated by the auditor as part of the quantitative analysis of exceptions.