1. Test of control provide the auditor with evidence to use in issuing an opinion on internal controls as well
as evidence on the reliability of the information system.
In testing the financial statement assertion, the auditor cn take one of three approaches
1. Assess reasonableness if assertions by performing substantive analytical procedures.
2. Directly testing the account balances through tests of details
3. Use combination of information about controls and tests of account balances.
Sampling involves the application of audit procedure at less than 100% of the transactions that occurred
during the period.- only applicable to examination, reporformance and confirmation.
To increase the likelihood that the sample will be representative, sample must be of sufficient size and
they must be selected from appropriate underlying population.
Test of control is done for the purpose of
1. Expressing an opinion on the client’s internal control
2. Assessing control risk
3. Compliance with company policies and government regulations
4. Testing individual items in account balances
Two types of risk
1. Nonsampling risk-errors in judgements about the correctness of a population that are due to
carelessness I the performance of the audit.
2. Sampling risk- defined as the risk that an inference drawn from a sample will be incorrect
because the sample is too small or otherwise not representative. (can be measured for
statistical samples)
Sample size is determined by two major factors
1. The size of a misstatement that would make a difference to the auditor’s assessment
2. The confidence level desire when making inference about the correctness of the population.