ASA 530 - Audit Sampling and Other Means of Testing - April 2006
Audit EvidenceAudit Evidence
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Audit Evidence
16 In accordance with ASA 500 Audit Evidence, audit evidence is obtained by performing risk assessment procedures, tests of controls and substantive procedures. The type of audit procedure to be performed is important to an understanding of the application of audit sampling in gathering audit evidence.
Risk Assessment Procedures
17 In accordance with ASA 315 Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement, the auditor is required to perform risk assessment procedures to obtain an understanding of the entity and its environment, including its internal control. Ordinarily, risk assessment procedures do not involve the use of audit sampling. However, the auditor often plans and performs tests of controls concurrently with obtaining an understanding of the design of controls and determining whether they have been implemented. In such cases, the following discussion of tests of controls is relevant.
Test of Controls
18 Under ASA 330 The Auditor’s Procedures in Response to Assessed Risks, the auditor needs to perform tests of controls when the auditor’s risk assessment includes an expectation of the operating effectiveness of controls.
19 Under ASA 330, and based on the auditor’s understanding of internal control, the auditor needs to identify the characteristics or attributes that indicate performance of a control, as well as possible deviation conditions which indicate departures from adequate performance. The presence or absence of attributes can then be tested by the auditor.
20 Audit sampling for tests of controls is generally appropriate when application of the control leaves audit evidence of performance (for example, initials of the credit manager on a sales invoice indicating credit approval, or evidence of authorisation of data input to a microcomputer based data processing system).
Substantive Procedures
21 Substantive procedures are concerned with amounts and are of two types: tests of details of classes of transactions, account balances, and disclosures and substantive analytical procedures. The purpose of substantive procedures is to obtain audit evidence to detect material misstatements at the assertion level. In the context of substantive procedures, audit sampling and other means of selecting items for testing, as discussed in this Auditing Standard, relate only to tests of details. When performing tests of details, audit sampling and other means of selecting items for testing and gathering audit evidence may be used to verify one or more assertions about a financial report amount (for example, the existence of accounts receivable), or to make an independent estimate of some amount (for example, the value of obsolete inventories).