Extrapolate - link to confidence interval
Qualitative: analyze the nature and determine the cause of errors
Quantitative
TOC - Error rate vs Tolerable error rate
SP - Projected calculated error vs tolerable error (Connected to performance materiality)
Substantive procedures are connected to
Performance materiality
Steps in evaluating the sample results
a. Inspect the nature and cause of errors found
b. Calculate the sample results
c. Test of controls
a. Inspecting the nature and cause of errors found
- Is it an error according to the error definition?
- Determine the type of error - Anomalous error ( which is not representative if the population)
3.Inspect the nature and cause of error ( indicates risk areas)
S45 of the APA requires auditors to report irregularities
b. Calculate the sample results
- Substantive procedures
- Test of controls
Substantive procedures
- Accumulate errors found, calculate the net error
- Project or extrapolate the errors to the rest of the population
- Objective : Conclusion on population based on the sample result
An error can only be extrapolated if a random sample was used?
True
How is the project or extrapolation of the errors to the rest of the population under substantive procedures done?
- Scale the number up in relation to the population
- Projected calculated error amount
- Actual and projected errors are translated to a schedule of audit differences
Test of controls
- Calculate the error rate as a % of the number of units tested - what is the deviation
- Estimate the error rate of the population - not projecting, it is representative of the population
- Determine whether it is acceptable, If there are any compensating internal controls and whether the control risk evaluation should be adjusted to preform more substantive procedures
