CPAs may decide to apply nonstatistical or statistical techniques to audit testi

Question

CPAs may decide to apply nonstatistical or statistical techniques to audit testing.

List and explain the advantages of applying statistical sampling techniques to audit testing.

List and discuss the decisions involving professional judgment that must be made by the CPAs in applying statistical sampling techniques to tests of controls.

You have applied attributes sampling to the client's pricing of the inventory and discovered from your sampling that the sample deviation rate exceeds your tolerable rate. Discuss the courses of action you take.

Explanation / Answer

A) Advantages are as follows:

1) It helps in avoiding overauditing by determining the accurate sample size

2) It helps in analysing sample results objectively.

B) Decisions involving personal judgement :

1) Determining the maximum deviation rate

2) Evaluation of results

C) Couse of action to be taken:

1) Increase the size of sample so that we can get more precise rsults.

2) Finding out the reason behind such high deviation

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