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Maintenance of Compliance Audit Guidelines - Sampling

Maintenance of Compliance Audit Guidelines - Sampling

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Maintenance of Compliance Audit Guidelines - Sampling

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  1. Maintenance of Compliance Audit Guidelines - Sampling

    SAI IndiaSeptember 2011
  2. Sampling Sampling is used by SAI-India extensively in Financial Audit Compliance Audit Performance Audit
  3. Sampling in Compliance Audit Planning – selection of units for audit Audit Execution – selection of transactions for detailed scrutiny Vouchers, contracts, pay bills/ pay bill items
  4. Methods of Sample Selection Stratification of population into High value transactions/ auditee units These are generally covered 100 per cent Such coverage facilitates providing necessary audit assurance Other transactions/ auditee units Statistical sampling or Non-statistical / judgemental sampling
  5. Methods of Sample Selection (Contd.) Statistical sampling Generally where transactions are computerised Simple Random Sampling/ Stratified Random Sampling/ Attribute Sampling/Monetary Unit Sampling (MUS)/ multi-stage or cluster sampling Non-statistical sampling Followed in majority of cases, where transactions are not computerised Judgement, based upon past experience, perception of effectiveness of internal controls, risk etc.
  6. Statistical sampling To form an opinion on the population as a whole Scope for extrapolation of sample results across population Extensively used in audit of Central Government receipts State Government receipts not computerised to the same extent Used to a lesser extent in audit of expenditure
  7. Statistical sampling (contd.) Simple Random Sampling Commonly used to select invoices, contracts, payroll items (computerised or manual) using random number table/ IDEA Results extrapolated only in qualitative terms Not generally quantified More commonly implemented as Stratified Random Sampling Also used for attribute sampling (especially for IT audits) in addition to variable sampling E.g. has the payment been properly authorised or not?
  8. Stratified Random Sampling Stratify transactions into broad strata Select all high value items – 100 per cent Others selected at random from various strata with smaller value strata forming fewer samples
  9. SRS Example – Inventory 100 per cent check of high value items & negative balance items For other strata, different percentages of check (random selection), depending on monetary value Since there are a multiplicity of checks to be performed, we do not derive sample size based on targeted confidence levels (90/ 95 per cent)
  10. Monetary Unit Sampling Probability of selection of an item is proportionate to its value (e.g. invoice/ contract value) Higher the contract value/ tax assessment, higher the probability of selection Used in Central revenue audits, and other audits, involving computerised selection
  11. Judgemental/ Non-statistical sampling Traditionally used for “test check” purposes, where 100 per cent population cannot be analysed Often implemented through selection of transactions for 2 months, out of the whole year’s transactions Generally, March is selected as one of the months More transactions/ payment value Higher risk Tendency to exhaust budgetary appropriations before lapse Adjustment entries before closure of accounts
  12. Sampling - Planning Multi-stage/ cluster sampling approach adopted State/ Province District Block/ Mandal Gram Panchayat/ Other Unit Works/ Transactions
  13. Multi-Stage Sampling Example – Audit of Medical Department State of Andhra Pradesh One component – Medical Infrastructure Lowest level – sub-centres Population of 2,000/ 3,000 Primary Health Centres (PHCs) Population of 20,000 Community Health Centres Population of 80,000 District Hospitals Speciality Hospitals
  14. MSS Example – Contd. Audit focus Health Centres infrastructure – existence, usability Ambulance Electricity / Stand-by Power Supply Water Supply + Water storage Separate wards and toilets for male and female patients Waiting rooms Telephone Accommodation for staff/ attendants Other rooms (In-Patient/ Out-Patient Areas, Operation Theatres, Labour (Gynaec) Room etc.) as prescribed for each level Equipment for OT
  15. MSS Example – Contd. Medicines Adequate stock of prescribed medicines at each level Cold chain Manpower Doctors (lady doctors separately), nurses, helpers Patient-bed ratio Laboratory services (diagnostic + radiological services) Emergency services
  16. MSS Example – Selection State Level – Policy & Planning District Level Judgemental selection Most backward and most forward districts (based on HDI) Expenditure incurred on medical health Risk perception Complaints, media reports, past ARs etc. Regional balance within State
  17. MSS Example Within district 1/3 of Community Health Centres Judgemental/ random selection Under CHCs 1/3 of PHCs Judgemental/ Random selection Under PHCs 1/3 of SCs Random selection
  18. Audit Reporting – Results of Sample Quantitative extrapolation across entire population not done Percentage of sample not conforming to requirements (e.g. prescribed medical infrastructure parameters) indicated No attempt to project sample results across the larger population Multiplicity of parameters Unlike receipt audit (under-assessment/ over-assessment of tax on a case)
  19. Thank You