## ISA 530, Audit Sampling

Per ISA 530 Audit sampling 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 drawn. Here on MCQs.club we have prepared easy Multiple-Choice Questions (MCQs) on ISA 530 Audit sampling revised IFAC that fully cover the ISA 530 summary and definition, ISA 530 Audit sampling MCQs with answers, these MCQs are a basis of conclusions. These MCQ on SA 530 are helpful for Competitive exams, Professional Accountancy exams and Business management exams.

**Per ISA 530 Audit sampling 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 drawn.**

**True**- False

**Audit Sampling is – ‘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.**

**The above statement is correct**- The above statement is incorrect

**Detection risk is the risk of failure to detect a material misstatement of an item in the financial statements as a result of insufficient audit testing. It can be analysed into:**

- sampling risk
- non-sampling risk.
**Both A&B**- None

**Sampling Risk –**

**is the risk that the auditor’s conclusion based on a sample is different from the conclusion that would be reached if the whole population was tested**- is the risk that the auditor’s conclusion is inappropriate for any other reason, e.g. the application of inappropriate procedures or the failure to recognise a misstatement.
- Both A&B
- None

**Which of the following statement is correct?**

- In order to decrease sampling risk, the auditor could select a larger sample.
- By the laws of probability, sampling risk should be lower when a larger sample is taken.
**Both A&B**- None

**Non-Sampling Risk –**

- is the risk that the auditor’s conclusion based on a sample is different from the conclusion that would be reached if the whole population was tested
**is the risk that the auditor’s conclusion is inappropriate for any other reason, e.g. the application of inappropriate procedures or the failure to recognise a misstatement.**- Both A&B
- None

**The fact the Non-sampling risk only occur due to factors involving errors by the auditors or incompetence of the audit team, or the need to work on very tight deadlines, in practice, the non-sampling risk will usually be set at zero.**

**The above statement is correct**- The above statement is incorrect

**Stratification –**

- Stratification is used in conjunction with sampling.
- Stratification is the process of breaking down a population into smaller subpopulations
- The objective of stratification is to enable the auditor to reduce the variability of items within the subpopulation and therefore allow sample sizes to be reduced without increasing sampling risk.
**All of the above**

**Statistical sampling means any approach to sampling that uses:**

- Random selection of samples
- Probability theory to evaluate sample results.
**Both A&B**- None

**Statistical sampling methods include:**

- Random selection
- Systematic selection
- Monetary unit selection
**All of the above**

**The usual technique for obtaining a representative sample is random selection.**

**True**- False

**The benefits of statistical sampling techniques include:**

- Statistical sampling provides an objective, mathematically precise basis for the sampling process.
- The required sample size can be calculated precisely (using statistical probability techniques).
- There may be circumstances where statistical sampling is the only means of auditing efficiently (for example, in the case of very large “populations” of items).
**All of the above**

**The disadvantages of statistical sampling techniques are as follows:**

- A degree of training and technical expertise is required if auditors are to use statistical sampling techniques effectively.
- This requires an investment in the necessary training for audit staff.
- Sample sizes may be larger than under a judgmental approach, thus increasing the time (and the cost) involved in the audit.
**All of the above**

**Non-statistical sampling methods include:**

- Haphazard selection
- Block selection
**Both A&B**- None

**Haphazard selection –**

**auditor does not follow a structured technique but avoids bias or predictability.**- where a constant sampling interval is used (e.g. every 50th balance) and the first item is selected randomly.
- this involves selecting a block of contiguous (i.e. next to each other) items from the population. This technique is used for cut-off testing.
- All of the above

**Block selection –**

- auditor does not follow a structured technique but avoids bias or predictability.
- where a constant sampling interval is used (e.g. every 50th balance) and the first item is selected randomly.
**this involves selecting a block of contiguous (i.e. next to each other) items from the population. This technique is used for cut-off testing.**- All of the above

**When designing a sample, the auditor has to consider:**

- The purpose of the procedure
- The combination of procedures being performed
- The nature of evidence sought
- Possible misstatement conditions.
**All of the above**

**When designing a sample, the auditor will therefore have to make a number of key decisions such as:**

- the sampling approach to be used (statistical or non-statistical)
- the characteristics of the population from which the sample is to be drawn
- the “tolerable” and “expected” misstatement or rate of deviation
**All of the above**

**When designing a sample, the auditor is required by ISA 530 to:**

- perform appropriate audit procedures on each item selected
- if the audit procedure is not applicable to the selected item, the auditor must perform the procedure on a replacement item.
- if the auditor is unable to apply the procedure (or a suitable alterative) to the selected item, that item must be treated as a misstatement/deviation.
**All of the above**

**When sampling, the auditor must choose a representative sample. Identify which of the following is correct?**

- If a sample is representative, the same conclusion will be drawn from that sample as would have been drawn had the whole population been tested.
- For a sample to be representative, it must have the same characteristics as the other items in the population from which it was chosen.
- In order to reduce sampling risk and ensure the sample is representative, the auditor can increase the size of the sample selected or use stratification.
**All of the above**

**Any issues identified during a test of control are called deviations.**

**True**- False

**If the actual deviation rate exceeds the tolerable deviation rate (i.e. the rate of deviation the auditor is willing to accept), the risk of material misstatement is greater and more substantive procedures will be required.**

**The above statement is correct**- The above statement is incorrect

**Misstatements –**

- are differences between the amounts actually recorded and what should have been recorded.
- Misstatements are identified when performing substantive tests of detail.
- If the misstatement is an anomaly (isolated), no further procedures will be performed as the misstatement is not representative of further misstatements.
**All of the above**

**If the auditor believes the misstatement could be representative of further misstatements the auditor will project the misstatement found in the sample across the population as a whole, and evaluate the results by considering tolerable misstatement.**

**True**- False

**Tolerable misstatement is defined as: 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**

**The above definition is correct**- The above definition is incorrect

**Tolerable misstatement is the practical application of performance materiality to an audit sample:**

- If the total projected misstatement in the sample is less than tolerable misstatement then the auditor may be reasonably confident that the risk of material misstatement in the whole population is low and no further testing will be required.
- If the total projected misstatement in the sample exceeds tolerable misstatement the auditor will extend the sample in order to determine the total misstatement in the population.
**Both A&B**- None

**Tolerable rate of deviation is a rate of deviation from prescribed control procedures which the auditor is prepared to accept and still be able to conclude that the financial statements are materially correct.**

**True**- False

—more to come soon—

Read more

Read more

Read more