Impact of SAS-39 on nonstatistical sampling

• Published in: The CPA journal (1975) 1982-06, Vol.52 (6), p.38
• Main Author: Bailey, Larry P
• Format: Article
• Language: English
• Subjects: Accounting records; Auditing standards; Audits; Compliance; Financial statements; Internal accounting control; Internal controls; Rates; Sample size; Sampling; Substantive; Tests
• ISSN: 0732-8435

The Auditing Standards Board has established guidelines for the planning, performance, and evaluation of audit sampling, with Statement of Auditing Standards (SAS) 39, Auditing Sampling. The Statement is applicable to nonstatistical sampling as well as statistical sampling. An auditor is faced with 2 possible risks in compliance testing of internal accounting controls: 1. overreliance risk, and 2. underreliance risk. When determining the sample size for the compliance tests of internal accounting controls, 3 items must be analyzed: 1. tolerable rate, 2. allowable risk of overreliance, and 3. population characteristics. Substantive tests gather evidence on the validity and the propriety of accounting treatment of transactions and balances. The results of the compliance tests will determine the nature, timing, and extent of substantive tests. Three factors must be analyzed to determine the number of items to be selected for a sample: 1. materiality, 2. allowable risk of incorrect acceptance, and 3. population characteristics. All auditors must now be familiar with certain sampling concepts and be able to justify the determination of the sample size used, how the sample was selected, and how the sample results were interpreted.