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Audit Sampling: An Introduction / Edition 5
     

Audit Sampling: An Introduction / Edition 5

by Dan M. Guy, D. R. Carmichael, O. Ray Whittington, Ray Whittington
 

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ISBN-10: 047137590X

ISBN-13: 9780471375906

Pub. Date: 11/29/2001

Publisher: Wiley

The fifth edition of AUDIT SAMPLING continues to provide an important bridge between basic introductory auditing texts and the level of highly technical professional knowledge necessary to handle audit sampling applications in actual practice. Written from the standpoint of internal and external auditors, the information is easy-to-understand by entry-level

Overview

The fifth edition of AUDIT SAMPLING continues to provide an important bridge between basic introductory auditing texts and the level of highly technical professional knowledge necessary to handle audit sampling applications in actual practice. Written from the standpoint of internal and external auditors, the information is easy-to-understand by entry-level auditing students, yet also appropriate for an advanced or graduate level auditing course.

Updated to reflect the rapidly changing audit environment, the fifth edition offers the following new features:

  • The latest information on new technology and techniques for testing controls
  • Reflects the revisions of SAS No. 55 made by SAS No. 94.
  • Significant discussion of setting materiality and relating that to tolerable misstatement, including a discussion of SAB No. 99
  • Information on changes in practice regarding the use of nonstatistical sampling
  • New examples and cases

The book companion web site includes data sets for cases particularly appropriate for solving with Excel. The actual cases are identified by an icon in the text. The web site also contains an Instructor's Resource Manual.

Product Details

ISBN-13:
9780471375906
Publisher:
Wiley
Publication date:
11/29/2001
Edition description:
5TH
Pages:
288
Product dimensions:
7.50(w) x 9.25(h) x 0.60(d)

Table of Contents

1Overview of Audit Sampling1
Nonstatistical and Statistical Audit Sampling2
Types of Statistical Sampling Plans4
Historical Developments of Statistical Sampling in Auditing5
What Are the Advantages of Statistical Sampling?7
The Risk of Sampling8
What Are Sampling and Nonsampling Errors?9
Statistical Sampling and Professional Judgment10
Relationship of Statistical Sampling to Auditing Standards11
Chapter Organization13
Case 1-1Is Sampling Involved?18
2Selecting a Representative Sample19
Definition of Random Sample, Population, and Sampling Frame20
Sampling with or without Replacement21
Unexamined Sample Items22
Random-Number Tables22
Using a Random-Number Table23
Computer-Generated Random Numbers27
Systematic Selection28
Random Systematic Selection30
Probability-Proportional-to-Size Selection30
Stratified Selection32
Haphazard Selection for Nonstatistical Sampling32
Summary33
Case 2-1Selecting a Sample39
Case 2-2Adams Supply Company41
3Attribute Sampling43
Attribute Sampling Plans44
Attribute Sampling and the Independent Auditor's Assessment of Control Risk45
Planning Considerations for Test of Controls49
Attribute and Deviations Conditions49
Population Definition50
Judgment in a Statistical Test of Controls51
Setting Risk of Assessing Control Risk Too Low (Reliability Level)53
Tolerable Rate (Upper Precision Limit)54
Fixed-Sample-Size Attribute Sampling56
Sequential (Stop-or-Go) Attribute Sampling62
Qualitative Analysis in Attribute Sampling Applications67
Illustrative Attribute Sampling Application68
Discovery Sampling70
Relating Attribute Sampling Results to Monetary Misstatement74
Summary74
Case 3-1Millar Company, Inc.83
Case 3-2EFT, Inc.84
Case 3-3Tech Producers, Inc.85
Case 3-4Client, Inc.85
Case 3-5Lewis & Foot, CPAs86
Case 3-6CPE Associates87
Case 3-7Taylor & Sons, Inc.87
Case 3-8Becker & Warren88
Case 3-9Dalton Stationery, Inc.89
4Using Variable Sampling for Accounting Estimation91
Precision and Reliability92
A Review of Selected Statistical Concepts92
What Is Accounting Estimation?98
Unstratified Mean Per Unit99
Steps in Applying Unstratified Mean Per Unit101
Demonstration of Unstratified Mean Per Unit104
Stratified Mean Per Unit105
Steps in Applying Stratified Mean Per Unit107
Difference Estimation109
Steps in Applying Unstratified Difference Estimation112
Ratio Estimation114
Summary115
Case 4-1Empress Cosmetique Case122
Case 4-2Stratified Sampling, Inc.137
Case 4-3Foot, Tick, & Tie, CPAs137
Case 4-4Ace Corporation138
Case 4-5Catalog Sales139
Case 4-6Sunnytime Snack Company140
5Using Variable Sampling for Audit Hypothesis Testing143
Sampling Risk and Audit Sampling144
Audit Risk, Materiality, and Substantive Audit Tests149
Tolerable Misstatement153
The Audit Hypothesis Model158
Demonstration of the Audit Hypothesis Model167
Proposing a Statistical Adjustment170
Summary171
Supplementary Topic: Using Audit Sampling for Compliance Auditing171
Case 5-1Blumenthal, Inc.183
Case 5-2Statistical, Inc.183
Case 5-3Draper, Inc.185
Case 5-4Fairview Publishing Company186
Case 5-5Accounts Receivable, Inc.189
Case 5-6AHT, Inc.189
Case 5-7Smith, Inc.190
Case 5-8Microtext Corporation and Industrial Supply Company190
6Probability-Proportional-to-Size Sampling193
Objectives and Assumptions of PPS Sampling194
Advantages and Disadvantages of Using PPS Sampling195
Basic Description of PPS Sampling196
Evaluation Based on the Poisson Probability Distribution197
PPS Sampling for Overstatements201
Sampling Risk and PPS Sampling204
Determining Tolerable Misstatement Using PPS Sampling205
Determining the PPS Sample Size206
PPS Sampling for Overstatements and Understatements207
PPS Sampling for Attributes208
Summary208
Case 6-1Clip Joint, Inc.214
Case 6-2Roll Tide214
Case 6-3Wagner's Appliance Company215
Case 6-4Bell & Tyler, Inc.216
Case 6-5Carter & Warren, Inc.216
7Nonstatistical Audit Sampling219
How Does Statistical Sampling Differ from Nonstatistical Sampling?220
Why Use Nonstatistical Audit Sampling?222
What Is a "Formal" Nonstatistical Sampling Plan?223
Why Use a Formal Nonstatistical Sampling Approach?224
Illustration of a Formal Approach to Nonstatistical Sampling225
Use of Nonstatistical Sampling for Tests of Controls233
Summary233
Case 7-1Nonstatistical, Inc.236
Case 7-2Landi Corporation236
Case 7-3Ryan Corporation237
Appendix ACalculation Worksheets239
Appendix BList of Equations245
Appendix CSAS No. 39--Audit Sampling (AU 350 As Amended)249
Appendix DAudit Sampling: Auditing Interpretations of Section 350265
Index267

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