You are required to identify situations when a sampling approach would be appropriate
- Where large populations exist, for example for organizations with numerous transactions or where there are many account balances within a class of transactions.
- Where the client has adequate internal controls. Where there are no controls it is impossible to use a sampling approach because of increased expected error.
- Population being tested must be homogenous in materiality. Where the population is not homogenous it is not possible to select a representative sample;
- Items must be separately identifiable therefore sequential numbering is essential. This will facilitate the sample selection process;
- Expectation of error must be low, i.e. that the internal control system must be reliable. Where the expected error is high it is not appropriate to use a sampling approach
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