The allowance for sampling risk when no misstatements are found in the sample is
After you have performed your audit procedures on the set of sampled data you can use Analytics to: Show
Even if you found no errors, you still use the evaluation feature to calculate the basic allowance for sampling risk. Note Evaluating errors requires input of some of the values previously generated by calculating sample size. To use the evaluation feature with the results of a monetary unit sample, you must have drawn the sample using either the fixed interval or the cell selection methods. How evaluation and comparison workWhen you evaluate, Analytics uses a statistical formula to project the misstatements you found in the sample to the entire account, and calculates the Upper Error Limit (upper misstatement limit). You compare the calculated value to the Materiality that you decided upon earlier when you calculated sample size. Based on the comparison, you decide if monetary data is fairly stated.
StepsNote Do not include the thousands separator, or the percentage sign, when you specify values. These characters prevent the command from running, or cause errors.
Evaluate dialog box inputsThe table below provides detailed information about the input values in the Evaluate dialog box. Main tab – input values
The figure below shows an example of input values for evaluating errors in a monetary unit sample.
ResultsEvaluating the errors you found in a monetary unit sample produces the following results:
The figure below shows the results of evaluating errors found in a monetary unit sample.
What the “Upper Error Limit” tells youThe total amount of Upper Error Limit, when compared to the Materiality that you decided upon when you calculated the sample size, tells you:
ExampleYou evaluate the errors you found in a monetary unit sample and Analytics returns an Upper Error Limit of $28,702.70. This amount is less than the Materiality (tolerable misstatement) of $29,000 that you specified earlier when you calculated the sample size, and specified a confidence level of 95%. Based on this information, you can make the following statement: There is a 95% probability that the actual misstatement in the account balance does not exceed $28,702.70. If the Upper Error Limit is greater than $29,000, the account balance is probably materially misstated. You need to decide upon further appropriate steps to meet your audit objective. How the Upper Error Limit is calculated for monetary unit samplingThe Upper Error Limit calculated by Analytics is a compound figure that adjusts for sampling risk – that is, the risk that misstatements in the sampled amounts underrepresent the true total amount of misstatement in the account balance you are examining. Show me more Upper Error Limit is the sum of the following amounts:
What is tolerable error in sampling?“Tolerable error” means the maximum error in a population that the auditor is willing to accept.
What is tolerable deviation rate?(j) Tolerable rate of deviation – A rate of deviation from prescribed internal control procedures set by the auditor in respect of which the auditor seeks to obtain an appropriate level of assurance that the rate of deviation set by the auditor is not exceeded by the actual rate of deviation in the population.
How is sampling risk measured?The allowance for sampling risk is the level of uncertainty associated with sampling. It is calculated as the difference between the tolerable deviation and the expected mean of the population.
What is the relationship of tolerable misstatement to sample size?There is an inverse relationship between sample size and tolerable misstatement, so the sample size would decrease if the tolerable misstatement increases.
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