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Regarding inventory count,
The discrepancies noted at the inventory count should be subject to further audit work. The results of the test counts should be extrapolated over the population in order to evaluate the potential misstatement of inventory as a whole.
My question is when auditor discover errors as a result of the audit procedures performed, what is the trigger point for them to extrapolate the error over the population to evaluate the misstatement? (Is this practice just limited to inventory?)
See in Chapter 8 re the evaluation of misstatements – a projected error is the auditor’s best estimate of error in a population based on the extrapolation of errors in a sample.
The stages in audit sampling are:
Design the sample
Select the sample
Test the sample
Evaluate the sample results
So in answer to your question – this is in no way limited to inventory – it applies to any transaction type/balance that is subject to sampling.