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What can an auditor do in a situation where the company’s documentation for material transactions which are easily pick for an audit sample are all well documented and complete, but the transaction below the rador, contain misstatements which cumulatively amount to a material figure and are not likely to be in the auditors sample. is there a way the risk of picking a wrong sample can be reduced or minimised?
Well, the audit sample should include some randomly picked items. IN other words, even in stratified samples where preference is given to larger items, you must cover a selection of all – in case there are many incorrect small ones.
The concept of ‘performance materiality’ recognises that materiality levels might have to be set lower than might be expected in case many errors all add up the same way.
HTH
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