SAMPLING/TEST CHECKING IN AUDITING

MEANING

Test checking means examining less then 100% of items in the population i.e. it refers to the application of audit procedures to less than 100% of items within a population of audit relevance such that all sampling units have a chance of selection in order to provide the auditor with a reasonable basis on which to draw conclusions about the entire population.

WHY IT IS REQUIRED

Auditor usually doesn’t have enough time for detailed 100% examination.

Numbers of transactions/ Balances are generally very high.

Mostly items are identical.

If, on basis of compliance procedures, it is concluded that internal control system is very effective, there is no need for detailed 100% examination.

EXAMPLES WHERE IT MAY NOT BE SUITABLE

Checking bank reconciliation statement.

Few transactions, very high in amount.

Few transactions with related parties.

Few transactions, having unusual nature.

Disclosure requirement of accounting standard.

Compliance with statutory provision.

Significant entries near/ at year-end.

Few transactions involving foreign exchange.

When internal controls are very weak.

SM Classes provides quality enriched and effective CA Classes, IDT classes, Income Tax training course, IPCC course, Corporate accounts course, Audit classes in Delhi etc.