CIRCUMSTANCES WHERE AUDIT SAMPLING MAY NOT BE APPROPRIATE

CIRCUMSTANCES WHERE AUDIT SAMPLING MAY NOT BE APPROPRIATE

a)     Where the auditor is put upon inquiry

b)    Where the internal control procedures are weak and 100% audit testing is feasible

c)     Where the transactions under review is one off or non recurring in nature and is material

d)    Where the items are unusual or extraordinary

e)     Where the items are specially required to be disclosed in the financial statements by law or other professional requirements.

f)      Where the items within the class of transactions, asses, liabilities and owner equity items are few and are individually material.

JUDGEMENT SAMPLING AND STATISTICAL SAMPLING

These are basic approaches to the selection of samples and evaluation of sample results. Sample solution involves deciding how to select sample size from the population where as evaluation of results involves drawing conclusion based on the audit test.

JUDGMENT SAMPLING

This means selecting a sample of appropriate size on the basis the auditor's judgment of what is desirable.

Advantages

1.     The approach has been used for many years and will be understood and refined by experience.

2.     Because of the sixth sense of some auditors, they can bring their expertise and judgment into play.

3.     No special knowledge of statistic is requires

4.     All the audit time is spent on auditing

Disadvantages

1.     As techniques, it is not always fully understood which could bring false results.

2.     It consumes too much time.

3.     It is inflexible

4.     Testing several transactions and documents at the same time, is not easily incorporated in statistics.

Overall, judgment sampling is still preferred methods by majority of auditors. This is because complete are reducing in simple formation, in the past judgment worked because very large samples were But today, the small samples required y economic logic require careful measuring the risk and can he done by the use of statistical techniques.

TYPES OF SAMPLING

We have types of sampling

a)     Random or probability sampling: Here the selection of sample is based purely by chance e.g. tossing of coins or the drawing of cards from a standard deck.

b)    Non-Random or non-probability sampling: Selection is not based purely on chance but by description.

The use of both depends on the influence of the subject matter of the research. However, research has shown that or probability sampling is widely used because of high quality research result. However, some of the common random sampling are as follows:

a)     Simple random sampling: is the selection procedure in which the choice of selecting a particular element into a sample does not jeopardize the chance of other being selected e.g. loitering or secret ballot method.

b)    Systematic sampling: it enables the choice of population elements on the basis of the user stepwise orderly criteria of selection,

c)     Stratified sampling. This means diving population into sub-population or into layers. Going hierarchical order.

d)    Cluster sampling: this is useful when data is maintained in clusters or bunches) as wages records are kept in weeks or sales invoice in months. Here the shortcoming is that sample may not be representative.

e)    Haphazard/Accidental sampling: simply choosing items subjectively but avoiding bias. This method is acceptable for non-statistical sampling. However, the auditor cannot be completely unbiased.

Flow Chart

Auditors frequently prepare flowcharts of cheats system as part of the study of the internal control structure. At other times, auditors use client-prepared flowcharts. There are three common types of flow charts. System flow charts, internal control flow charts and programme flow charts. System flowcharts; these are simple representations of the flow of documents and records in the organization.

Internal control flowcharts: these are more elaborate. They are graphical representation of the flow of documents and record organization and show the segregation of duties and other controls present in the system.

Program flowcharts: These are more detail and relate only to specific computer programme. Symbols are used to show predefined items, and actions. No matter the symbol use the concept of flow charting, remain unchanged. However, symbols are mostly defined. Flow charts ensure, as far as possible the completeness or recording. It eliminates the need for lengthy narratives and it easy to understand. Areas of weakness are easily identified. Because the firm is standardize, for easy assimilation. The main disadvantage is that flowcharts do not facilities the recording of physical personnel supervision or management controls, which are best contained in narrative notes. They are time consuming and therefore expensive to prepare.