HKSA 530 - Audit Sampling (Condensed)
| Section | Key Concept | Brief Description |
|---|---|---|
| Introduction & Scope | Scope & Objective | Applies when auditor uses sampling; objective is to draw conclusions about a population from a sample. |
| Definitions | Key Terms | Defines audit sampling, population, sampling risk, non-sampling risk, anomaly, sampling unit, statistical sampling, stratification, tolerable misstatement, and tolerable rate of deviation. |
| Sample Design, Size & Selection | Design, Size, Selection | Auditor must design sample considering purpose and population; determine sufficient sample size; select items so each unit has a chance of selection. |
| Performing Audit Procedures | Procedures on Selected Items | Perform procedures on each selected item; use replacement if procedure not applicable; treat inability to apply as deviation/misstatement. |
| Nature & Cause of Deviations/Misstatements | Investigation & Anomalies | Investigate nature and cause; evaluate effect; treat anomalies only in extremely rare circumstances with high certainty. |
| Projecting Misstatements | Projection for Tests of Details | Project misstatements found in sample to population; exclude anomalies if appropriate. |
| Evaluating Results | Evaluation & Conclusions | Evaluate sample results and whether sampling provided reasonable basis; consider projected + anomalous misstatement vs tolerable misstatement. |
| Appendices | Stratification, Factors, Methods | Guidance on stratification, value-weighted selection, factors influencing sample size, and sample selection methods. |
Introduction & Scope (Para 1-4)
Scope of HKSA 530
HKSA 530 applies when the auditor uses audit sampling in performing audit procedures. It covers designing and selecting the sample, performing tests of controls and details, and evaluating results.
Objective
The objective is to provide a reasonable basis for the auditor to draw conclusions about the population from which the sample is selected.
Definitions (Para 5)
Key Definitions
| Term | Definition |
|---|---|
| Audit Sampling | Application of procedures to less than 100% of items, with all units having a chance of selection, to draw conclusions about the entire population. |
| Population | The entire set of data from which a sample is selected. |
| Sampling Risk | Risk that conclusion based on sample differs from conclusion if entire population were tested. |
| Non-Sampling Risk | Risk of erroneous conclusion for reasons not related to sampling (e.g., inappropriate procedures, misinterpretation). |
| Anomaly | A misstatement or deviation demonstrably not representative of the population. |
| Sampling Unit | Individual items constituting a population (e.g., physical items, monetary units). |
| Statistical Sampling | Random selection + use of probability theory to evaluate results. |
| Stratification | Dividing population into sub-populations with similar characteristics. |
| Tolerable Misstatement | Monetary amount set by auditor; application of performance materiality to a sampling procedure. |
| Tolerable Rate of Deviation | Rate of deviation from prescribed controls set by auditor. |
Sample Design, Size & Selection (Para 6-8)
Sample Design (Para 6)
When designing an audit sample, the auditor shall consider the purpose of the audit procedure and the characteristics of the population from which the sample will be drawn.
Sample Size (Para 7)
The auditor shall determine a sample size sufficient to reduce sampling risk to an acceptably low level.
Selection of Items (Para 8)
The auditor shall select items so that each sampling unit in the population has a chance of selection.
| Method | Description |
|---|---|
| Random selection | Using random number generators or tables. |
| Systematic selection | Dividing population by sample size to get interval, then selecting every nth item. |
| Haphazard selection | Selecting without structured technique but avoiding bias. |
| Monetary Unit Sampling (MUS) | Value-weighted selection. |
| Block selection | Selecting contiguous items (generally NOT appropriate). |
Performing Audit Procedures (Para 9-11)
Procedures on Selected Items (Para 9)
The auditor shall perform audit procedures appropriate to the purpose on each item selected.
Replacement Items (Para 10)
If the audit procedure is not applicable to the selected item, the auditor shall perform the procedure on a replacement item.
Inability to Apply Procedures (Para 11)
If unable to apply designed or suitable alternative procedures, treat the item as:
- A deviation from prescribed control (tests of controls)
- A misstatement (tests of details)
Nature & Cause of Deviations/Misstatements (Para 12-13)
Investigation (Para 12)
The auditor shall investigate the nature and cause of any deviations or misstatements identified, and evaluate their possible effect on the purpose of the audit procedure and other areas of the audit.
Anomalies (Para 13)
In extremely rare circumstances, if the auditor considers a misstatement or deviation to be an anomaly, the auditor must obtain a high degree of certainty that it is not representative of the population.
Projecting Misstatements (Para 14)
Projection for Tests of Details
For tests of details, the auditor shall project misstatements found in the sample to the population.
Treatment of Anomalies
If a misstatement is established as an anomaly, it may be excluded when projecting misstatements. However, the effect of any such uncorrected misstatement still needs to be considered in addition to the projection of non-anomalous misstatements.
Evaluating Results (Para 15)
Evaluation of Sample Results
The auditor shall evaluate (a) the results of the sample, and (b) whether the use of audit sampling has provided a reasonable basis for conclusions about the tested population.
| Test Type | Unexpectedly High Result | Action |
|---|---|---|
| Tests of controls | High sample deviation rate | May increase assessed risk of material misstatement unless further evidence substantiates initial assessment. |
| Tests of details | High misstatement amount | May cause auditor to believe class/balance is materially misstated unless further evidence shows otherwise. |
Best Estimate of Misstatement
Projected misstatement + anomalous misstatement = auditor's best estimate of misstatement in the population.
Remedial Actions
If sampling has not provided a reasonable basis, the auditor may:
- Request management to investigate and adjust.
- Tailor further audit procedures (e.g., extend sample size, test alternative control, modify substantive procedures).
Appendices Summary
Appendix 1: Stratification & Value-Weighted Selection
Stratification divides population into sub-populations with similar characteristics to reduce variability and allow smaller sample sizes. Value-weighted selection uses monetary units as sampling units, directing effort to larger items.
Appendix 2: Factors Influencing Sample Size for Tests of Controls
| Factor | Effect on Sample Size |
|---|---|
| Increase in reliance on controls | Increase |
| Increase in tolerable rate of deviation | Decrease |
| Increase in expected rate of deviation | Increase |
| Increase in desired level of assurance | Increase |
| Increase in number of sampling units (large populations) | Negligible |
Appendix 3: Factors Influencing Sample Size for Tests of Details
| Factor | Effect on Sample Size |
|---|---|
| Increase in risk of material misstatement | Increase |
| Increase in use of other substantive procedures | Decrease |
| Increase in desired level of assurance | Increase |
| Increase in tolerable misstatement | Decrease |
| Increase in expected misstatement | Increase |
| Stratification | Decrease |
| Increase in number of sampling units (large populations) | Negligible |
Appendix 4: Sample Selection Methods
| Method | Notes |
|---|---|
| Random selection | Each item has known probability of selection. |
| Systematic selection | Ensure population not structured to correspond with interval. |
| Monetary Unit Sampling (MUS) | Value-weighted selection; results in monetary conclusions. |
| Haphazard selection | Not appropriate for statistical sampling. |
| Block selection | Generally not appropriate for audit sampling. |
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