ASA 530 Audit sampling – Effective date 1 July 2006

ISA 530 Audit Sampling Requirements

ASA 530 requires auditor to;

• consider the purpose of the audit procedure and the characteristics of the population from which the sample will be drawn;
• determine a sample size sufficient to reduce sampling risk to an acceptably low level;
• select items for the sample in such a way that each sampling unit in the population has a chance of selection;
• perform audit procedures, appropriate to the purpose, on each item;

If the auditor is unable to apply the designed audit procedures, or suitable alternative procedures, to a selected item, the auditor shall treat that item as a deviation from the prescribed control, in the case of tests of controls, or a misstatement, in the case of tests of details.

• investigate the nature and cause of any deviations or misstatements identified, and evaluate their possible effect on the purpose of the audit procedure and on other areas of the audit

In case of anomaly

the auditor shall obtain a high degree of certainty that such misstatement or deviation is not representative of the population. The auditor shall obtain this degree of certainty by performing additional audit procedures to obtain sufficient appropriate audit evidence that the misstatement or deviation does not affect the remainder of the population.

• project misstatements found in the sample to the population;
• evaluate the results of the sample; and
• evaluate whether the use of audit sampling has provided a reasonable basis for conclusions about the population that has been tested.

ASA 530 Audit Sampling Scope

ASA 530 applies when the auditor has decided to use audit sampling in performing audit ISA 530 deals with the auditor’s use of statistical and non-statistical sampling when designing and selecting the audit sample, performing tests of controls and tests of details, and evaluating the results from the sample.

ASA 530 Audit Sampling Objective

The objective of the auditor, when using audit sampling, is to provide a reasonable basis for the auditor to draw conclusions about the population from which the sample is selected.

ASA 530 – Definitions

Audit sampling (sampling) – Definition

The application of audit procedures to less than 100% of items within a population of audit relevance such that all sampling units have a chance of selection in order to provide the auditor with a reasonable basis on which to draw conclusions about the entire population.

Population –Definition

The entire set of data from which a sample is selected and about which the auditor wishes to draw conclusions.

Sampling risk –Definition

The risk that the auditor’s conclusion based on a sample may be different from the conclusion if the entire population were subjected to the same audit Sampling risk can lead to two types of erroneous conclusions:

• In the case of a test of controls, that controls are more effective than they actually are, or in the case of a test of details, that a material misstatement does not exist when in fact it does. The auditor is primarily concerned with this type of erroneous conclusion because it affects audit effectiveness and is more likely to lead to an inappropriate audit opinion.
• In the case of a test of controls, that controls are less effective than they actually are, or in the case of a test of details, that a material misstatement exists when in fact it does This type of erroneous conclusion affects audit efficiency as it would usually lead to additional work to establish that initial conclusions were incorrect.

Non-sampling risk –Definition

The risk that the auditor reaches an erroneous conclusion for any reason not related to sampling risk.

Anomaly –Definition

A misstatement or deviation that is demonstrably not representative of misstatements or deviations in a population.

Sampling unit –Definition

The individual items constituting a population.

Statistical sampling –Definition

An approach to sampling that has the following characteristics:

• Random selection of the sample items; and
• The use of probability theory to evaluate sample results, including measurement of sampling

A sampling approach that does not have characteristics (i) and (ii) is considered non-statistical sampling.

Stratification –Definition

The process of dividing a population into sub- populations, each of which is a group of sampling units which have similar characteristics (often monetary value).

Tolerable misstatement –Definition

A monetary amount set by the auditor in respect of which the auditor seeks to obtain an appropriate level of assurance that the monetary amount set by the auditor is not exceeded by the actual misstatement in the population.

Tolerable rate of deviation –Definition

A rate of deviation from prescribed internal control procedures set by the auditor in respect of which the auditor seeks to obtain an appropriate level of assurance that the rate of deviation set by the auditor is not exceeded by the actual rate of deviation in the population.