ACCT6007 Chap.6 Audit Strategy, Procedures and Sampling
Audit Strategy, Procedures and Sampling
This chapter converts assessed risk into the nature, timing and extent of audit work. It compares control reliance with a substantive emphasis, distinguishes tests of controls, tests of details and substantive analytical procedures, and evaluates evidence sufficiency and appropriateness.
Sampling work begins with the correct population, then covers selection, interval arithmetic, error evaluation and the difference between sampling and non-sampling risk. The strategy establishes scope, direction and timing, while the plan specifies the procedures needed to meet objectives. Reliance on controls must be earned through operating-effectiveness testing.
Tests of details seek misstatements directly, and substantive analytical procedures evaluate precise plausible relationships using reliable data. Sufficiency concerns quantity; appropriateness concerns relevance and reliability. More weak evidence cannot cure a procedure aimed at the wrong assertion.
Sampling applies work to less than the full population and creates sampling risk, while poor procedure choice or execution creates non-sampling risk. Systematic selection needs an interval and random start, but the population must also be complete and free of problematic periodic patterns. Exceptions are investigated and evaluated in context, then fed back into the audit plan.
Evidence sources have tendencies rather than automatic rankings. Confirmation may support existence yet be incomplete for valuation; observation proves what happened during attendance but not throughout the year; recalculation verifies arithmetic while leaving source-data validity open. Interim work needs a roll-forward bridge, especially after system or personnel changes.
Stratification can improve efficiency when unusual items differ from the remaining population, but key-item results should not be projected mechanically across unlike items. Every sampling conclusion belongs to the defined population and assertion, not to the whole audit by default.
What this chapter covers
- 01
Overall audit strategy
- 02
Audit plan and programme
- 03
Tests of controls
- 04
Substantive procedures
- 05
Evidence reliability
- 06
Audit sampling methods
Worked example · free
Construct a systematic sample
- 1Compute the interval as 480 divided by 16, which equals 30.
- 1Confirm that 11 lies between 1 and 30.
- 1Select 11, 41, 71, 101 and continue by 30.
- 1Check population completeness and any periodic pattern before relying.
Key terms
- Audit strategy
- The scope, direction and timing that guide the audit plan.
- Audit plan
- The nature, timing and extent of planned risk and further procedures.
- Test of controls
- A procedure evaluating whether a control operated effectively.
- Test of details
- A substantive procedure testing transactions, balances or disclosures directly.
- Analytical procedure
- Evaluation of plausible relationships and investigation of differences.
- Non-sampling risk
- Risk of a wrong conclusion from poor procedure choice or execution rather than sample selection.
Audit Strategy, Procedures and Sampling FAQ
How do nature, timing and extent differ?
Nature is the type and source of a procedure, timing is when it is performed, and extent is how much work is done. Higher risk can change all three, such as stronger external evidence, work closer to year end and a larger sample.
What makes audit evidence appropriate?
Appropriateness combines relevance to the assertion and reliability in the circumstances. More evidence does not cure evidence that addresses the wrong claim. Direct external evidence is often stronger, but every source and procedure still has limitations that require evaluation.
How should sample exceptions be evaluated?
Investigate cause and whether the exception is representative, project or assess the result as required, compare it with tolerable levels and consider qualitative context. The result may require a larger sample, a different procedure or revised risk assessment.
Exam move
Practise redesigning one procedure along nature, timing and extent. For every evidence source, name both its strength and limitation. In sampling questions, define the population and unit, calculate carefully, state the selection method and explain how errors or deviations affect the wider audit strategy.
Rewrite generic instructions such as inspect documents so they identify the selected item, supporting source, attribute examined and assertion. Compare confirmation, observation, recalculation, reperformance and analytical evidence without treating one hierarchy as absolute. Build a systematic sample by calculating the interval, choosing a valid random start and counting the final selections.
Then change the sample size and recompute from the beginning. Create one population with a periodic pattern to explain when the method can mislead. Separate control deviations from monetary misstatements and sampling risk from non-sampling mistakes. After every result, state whether risk assessment changes and which dimension of the plan changes.
For interim work, add a roll-forward step that covers the remaining period and investigates changes. The strongest answers connect the calculation or procedure to an audit conclusion rather than stopping at mechanics. Build an evidence matrix showing which procedure addresses which assertion and one limitation for each. When results conflict, write the follow-up before choosing a conclusion.
This keeps professional judgement visible and prevents unsupported averaging. Recount the selected items and confirm the sample conclusion stays within the defined population. Record how every exception changes the planned nature, timing or extent.
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