Considerations for firms when selecting sample items in ISAE Attestation

  Answer:

Once you have determined your sample size, you must select the transactions / balances that are going to make up your sample. For example, a sample of trust payments, or transfers from trust to business, or trust creditor balances etc. The method you apply in selecting these transactions – i.e. which ones you choose to be included in the sample, must be either in terms of your firm’s methodology, or must be agreed with the person responsible for the engagement. The method used to select items may be influenced by the nature of the items you are selecting, or the nature of the items in the population, such as frequency, size, homogeneity (transactions all quite similar in nature and size).

Common selection methods used are:
1. Random selection
This requires the use of random number generators or tables. These are available in Caseware IDEA, or you can create your own.

2. Systemic selection
This method calculates a sampling interval. The total number of sampling units (transactions or balances etc.) in a population is divided by the required sample size to give the interval between selected items. For example, in a population with 490 transactions, a sample size of 10 would have an interval of 49. The auditor may determine a starting point haphazardly, and then apply the interval to select the remaining items. For example:

Where transactions use sequential numbering, for example in receipts, you could use the receipt numbers with the starting and ending receipt numbers for the period. Alternatively, if transactions are not sequentially numbered, you may count and number the items in the population yourself from 1 to x and then apply the interval to your allocated numbers. In this case be sure to keep your workings, and if your population changes (e.g., more transactions are added after you calculated your sample), ensure that you revisit your sample selection to ensure that it remains appropriate.

3. Monetary unit sampling (MUS)
Careful consideration should be given to the items selected for testing in ISAE Attestation to ensure that the objectives of the procedures are achieved. The objectives of procedures in ISAE Attestation are as much related to compliance with the Acts and the Rules as with financial accuracy and therefore sampling on the basis of quantitative characteristics only may not necessarily provide sufficient and appropriate evidence for qualitative objectives.

This method applies a value-weighted selection method in which the sample size, sample selection and the subsequent evaluation of the results of the procedure are determined in monetary amounts. MUS is a technique which is deliberately biased towards choosing higher value items and has the evaluation facility to predict the financial result of errors, and uses formulae to calculate and select. The use of MUS should be carefully planned as there are several inputs which require additional analysis of the population, and the formulae are somewhat complex. 

4. Haphazard
We refer to the auditor’s judgmental selection (using no pre-determined approach or formula) of the sample items as haphazard. In this method, once the sample size is determined, the auditor reviews the population and makes selections of the items to include in the sample on a purely judgmental basis. In this case, because no structured approach is used, the auditor must apply other methods to ensure that there is no bias in the selection, or that any items in the population are missed in terms of consideration for selection. Haphazard selection can only be used when the sampling method is non-statistical.

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