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CISA Exam-Testing Concept-Sampling

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Testing Concept-Sampling

Hemang Doshi

CISA, ACA,DISA,FIII

Details about this E-Book:

‘Sampling’ is a repeated testing concept in almost all CISA attempt. We can expect minimum 2 questions on ‘Sampling’ in every CISA exam. The objective of this e-book is to ensure that CISA candidate get adequate knowledge of concepts on ‘Sampling’ .Question Answer and Explanation (QAE) are designed in accordance with CISA exam pattern.

Concepts have been simplified for easy reference of CISA candidates.

Difference between Statistical & Non-statistical sampling

Difference between Attribute Sampling & Variable sampling

Difference between Stop or go sampling & Discovery sampling

What is Confidence Co-efficient?

Confidence coefficient is a probability that sample are true representation of the population. To have high confidence correlation, you need to select high sample size or in other way, if you select high sample size your confidence co-relation will be high.

Let us see below example:

Point to remember for CISA exam:

(1)In any given scenario, statistical sampling is to be used when the probability of error must be objectively quantified (i.e no subjectivity is involved).

(2)In any given scenario, following sampling is best suitable for compliance and substantive testing:

(3)In any given scenario, best sampling technique where fraud is being suspected is Discovery Sampling.

(4)A higher confidence coefficient will result in the use of a larger sample size. In other way, higher sample size will give higher confidence coefficient.

(5)In any given scenario, when internal controls are strong, confidence coefficient /sample size may be lowered.

(6)In any given scenario, statistical sampling minimizes the detection risk.

 

Question, Answer & Explanation on ‘Sampling’ Concept:

Below QAE are solely on the concept of audit sampling. They are designed as per CISA exam pattern. Candidates are advised to attempt below questions multiple times. More emphasis to be given on explanation part for better understanding.

Use of statistical sampling will be more relevant as compared to judgment (non-statistical) sampling when:

A. it is required to mitigate sampling risk

B. auditor is inexperienced

C. the probability of error must be objectively quantified

D. it is required to mitigate audit risk

 

Answer: C. the probability of error must be objectively quantified

Explanation:

In any given scenario, statistical sampling is to be used when the probability of error must be objectively quantified (i.e no subjectivity is involved). Statistical sampling is an objective method of sampling in which each item has equal chance of selection. Choice A is incorrect because sampling risk is the risk of a sample not being representative of the population. This risk exists for both judgment and statistical samples. Also, audit risk is applicable for both judgment and statistical sampling.

 

 

Statistical sampling reduces which of the following risk:

 

A. audit risk

B. detection risk

C. inherent risk

D. sampling risk

 

Answer: B. detection risk

 

Explanation:

In any given scenario, statistical sampling minimizes the detection risk. Detection risk is the chance that an auditor will not find material misstatements in an entity’s financial statements. Detection risk is the risk that the auditor will conclude that no material errors are present when in fact there are. However, using statistical sampling, probability of error can be objectively quantified and hence detection risk can be minimized.

Other risks cannot be minimized using statistical sampling.

 

 

(3) IS auditor is reviewing the internal control of application software. The sampling method that will be MOST useful when testing for compliance is:

 

A. Attribute sampling

B. Variable sampling

C. Discovery sampling

D. Stop or go sampling

 

Answer: A. Attribute sampling

Explanation:

In any given scenario, attribute sampling method (either control is present or absent) will be useful when testing for compliance. Variable sampling is generally used for substantive testing. Discovery sampling is used when objective of audit is to discover fraud or other irregularities. Stop-or-go-sampling is used when auditor believes that very few errors will be found. It prevents excessive sampling by allowing an audit test to be stopped at the earliest possible moment.

 

 

With regard to confidence correlation, it can be said that:

 

A. small sample size will give high confidence correlation

B. if an auditor knows internal controls are strong, the confidence coefficient may be lowered

C. small confidence correlation will result into high sample size

D. if an auditor knows internal controls are strong, the confidence coefficient may be increased

 

Answer: B. if an auditor knows internal controls are strong, the confidence coefficient may be lowered

 

Explanation:

Confidence coefficient is a probability that sample are true representation of the population. In any given scenario, when internal controls are strong, confidence coefficient /sample size may be lowered. Greater the confidence coefficient, higher the sample size or in other way higher the sample size, higher the confidence coefficient.

 

(5) Test to determine whether last 50 new user requisitions were correctly processed is an example of:

 

A. discovery sampling

B. substantive testing

C. compliance testing

D. stop-or-go sampling

 

Answer: C. compliance testing

Explanation:

In any given scenario, compliance testing checks for the presence of controls. Compliance testing determines whether controls are being applied in compliance with policy. This includes tests to determine whether new accounts were appropriately authorized. In any given scenario, outcome/result of compliance testing will form the basis for planning of substantive testing. For example, if compliance testing indicates strong internal control, substantive testing may be waived off or reduced. In case of compliance testing indicates weak internal controls then substantive testing to be more rigorous. The development of substantive tests is often dependent on the outcome of compliance tests.

 

(6) IS auditor reviewing a critical financial application is concerned about fraud. Which of the following sampling methods would BEST assist the auditors?

 

A. Attribute sampling

B. Variable sampling

C. Discovery sampling

D. Stop or go sampling

Answer: C. Discovery sampling

Explanation:

In any given scenario, Discovery sampling is used when objective of audit is to discover fraud or other irregularities. Discovery sampling is used when an auditor is trying to determine whether a type of event has occurred, and therefore it is suited to assess the risk of fraud and to identify whether a single occurrence has taken place. Stop-or-go-sampling is used when auditor believes that very few errors will be found. It prevents excessive sampling by allowing an audit test to be stopped at the earliest possible moment. Attribute sampling method (either control is present or absent) will be useful when testing for compliance. Variable sampling is generally used for substantive testing.

 

 

(7) Which of the following sampling methods would be the MOST effective to determine whether access rights to staffs have been authorized as per the authorization matrix?

 

A. stratified mean per unit

B. attribute sampling

C. discovery sampling

D. stop or go sampling

Answer: B. attribute sampling

Explanation:

Attribute sampling method (either control is present or absent) will be useful when testing for compliance. Either access given as per authorization matrix or not given as per authorization matrix. Discovery sampling is used when an auditor is trying to determine whether a type of event has occurred, and therefore it is suited to assess the risk of fraud and to identify whether a single occurrence has taken place. Stop-or-go-sampling is used when auditor believes that very few errors will be found. It prevents excessive sampling by allowing an audit test to be stopped at the earliest possible moment. Stratified mean per unit and unstratified mean per unit are used in variable sampling.

 

(8) An IS auditor is determining the appropriate sample size for testing the effectiveness of change management process. No deviation noted in last 2 years audit review and management has assured no deviation in the process for the period under review. Auditor can adopt a :

 

A. higher confidence coefficient resulting in a smaller sample size

B. lower confidence coefficient resulting in a higher sample size

C. higher confidence coefficient resulting in a higher sample size

D. lower confidence coefficient resulting in a lower sample size

 

Answer: D. lower confidence coefficient resulting in a lower sample size

 

Explanation:

In any given scenario, when internal controls are strong, confidence coefficient /sample size may be lowered. Choice A is not correct because higher confidence correlation will always have higher sample size. Choice B is not correct because lower confidence coefficient will always have lower sample size. Choice C is not correct because where internal controls are strong, high confidence correlation or high sample size is not warranted.

 


CISA Exam-Testing Concept-Sampling

Point to remember for CISA exam: (1)In any given scenario, statistical sampling is to be used when the probability of error must be objectively quantified (i.e no subjectivity is involved). (2)In any given scenario, Attribute sampling is best suitable for compliance and variable sampling for substantive testing. (3)In any given scenario, best sampling technique where fraud is being suspected is Discovery Sampling. (4)A higher confidence coefficient will result in the use of a larger sample size. In other way, higher sample size will give higher confidence coefficient. (5)In any given scenario, when internal controls are strong, confidence coefficient /sample size may be lowered. (6)In any given scenario, statistical sampling minimizes the detection risk.

  • Author: Hemang Doshi
  • Published: 2016-08-29 21:20:08
  • Words: 1390
CISA Exam-Testing Concept-Sampling CISA Exam-Testing Concept-Sampling