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Audition and Sampling

1) What are some ways that auditors can be sure that the sample sizes will be fair enough to provide a look at internal controls, yet comprehensive enough to detect any irregularities? Is there a way?

2) Let's say that we have 1500 invoices that need to be reviewed. We will say that 25% of the invoices belong to one client and we are looking to test how effective our revenue reporting procedures are. Would you use statistical or non-statistical sampling and why?

3) Is there a feasible way that employers can help safeguard the use of SSN verification sites and HR data to protect other employees from identity theft?

4) What types of web data have you found helpful in database searches?

5) Think about your general conversations with others in your workplace - colleagues or customers. Have you ever voice inflection and tone to attempt to control a conversation? Do you lean toward someone in an attempt to get more detail? Have you lowered your voice so that the other person will also lower theirs?

6) I would like to hear your thoughts on this. In your current jobs, have you been on either side of this type of a cognitive interview? Do you think it makes people shut down or does is separate the honest individuals from the 'not so honest' ones?

7) Are there ways that auditors or investigators can use documentary evidence in an off-book scheme?

8) What precautions need to take place in collecting private residence trash to use as evidence?

Solution Preview

1) One way that the auditors can be sure that the sample size will be fair enough to provide a look at internal controls, yet detect any irregularities is to use is to use professional judgment by relating the audit evidence produced by the sample to other audit evidence when forming a conclusion about what sample size is appropriate. Also the auditor is often aware of the account balances and transactions that are likely to contain misstatements. He should use this knowledge in drawing the sample. The next point the auditor should keep in mind is that the sample size should be fair enough whether he uses statistical or non statistical sampling to make sure that performing audit procedures will give him reasonable basis for forming an opinion about the financial statements.

2) Non-statistical sampling for the 1500 invoices because 375 invoices belong to one customer and these should be confirmed by the customer. Of the remaining 1,125 invoices statistical sampling should be used. We assume that the auditor does have any special knowledge about the other invoices that in his judgment have to be tested to fulfill his audit objectives.

3) There are standard ways in which SSN verification sites and HR data may be used to protect employees from identity thefts. The SSN verification should be carried out only to ensure that the records of current or former employee are correct for completing IRS wage and tax statement. The company policy regarding ...

Solution Summary

Sampling in auditing is explained in a structured manner in this response. The answer includes references used.

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