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00 - Case Study and Instructions

The document describes a case study on applying sampling procedures in a test of details of drugs and medicines inventory and expense accounts at Dr. E. F. Hospital. The auditor calculated materiality thresholds and intends to determine completeness/accuracy of recorded issuances through sampling. The auditor needs to complete the audit sampling working paper by determining the adjusted population, tolerable misstatement, expected misstatement, and sample size based on the information provided. Samples will then be selected and tested, with errors projected to evaluate the results.

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Ralph Christer Maderazo
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104 views2 pages

00 - Case Study and Instructions

The document describes a case study on applying sampling procedures in a test of details of drugs and medicines inventory and expense accounts at Dr. E. F. Hospital. The auditor calculated materiality thresholds and intends to determine completeness/accuracy of recorded issuances through sampling. The auditor needs to complete the audit sampling working paper by determining the adjusted population, tolerable misstatement, expected misstatement, and sample size based on the information provided. Samples will then be selected and tested, with errors projected to evaluate the results.

Uploaded by

Ralph Christer Maderazo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Webinar on Audit Sampling

CASE STUDY
Session 4: Applying sampling procedures in test of details

Objective: To perform sampling procedures in test of details using a case study

THE CASE

Dr. E. F. Hospital

Dr. E. F. Hospital (or Hospital DEF) is a state-run hospital and is under the
jurisdiction of the Commission on Audit. The hospital, by nature, is a spending agency, with
its operations mainly financed by the government.

During the audit planning for the year 2016, the auditor calculated the following
materiality thresholds:

Performance Materiality ₱ 1,902,409.32


Testing Threshold 209,265.03

In the performance of test of details on Drugs and Medicines Inventory and Expense
Accounts (both accounts are assessed with moderate Risk of Material Misstatement (RMM),
the auditor intends to determine the completeness/accuracy of the recorded issuances of drugs
and medicines through sampling. An error in the recording of issuances of drugs and
medicines per stock card and monthly report is considered a misstatement.

The auditor plans to carry out the sampling procedures on a population of Issuances of
Drugs and Medicines per Stock Cards or Requisition Issue Slips (RIS) in the year 2016. The
auditor wants to perform the sampling procedures with a confidence level of 95%.

In the previous year’s audit, the misstatements found in the same account amounted to
approximately ₱100,000.00, so the auditor expects the same amount of misstatement to occur
this year. However, the auditor can tolerate ₱285,361.40 worth of misstatements, or 15% of
performance materiality.

INSTRUCTIONS

1. Work individually on this activity.

2. You will be given the following materials as part of this case study:

 Annex 1: List of items in the population


 Annex 2: Table of Random Numbers
 Working Paper 1: Audit Sampling Working Paper for Test of Details

Page 1 of 2
Seminar on Audit Sampling
CASE STUDY
Session 4: Applying sampling procedures in test of details

 Working Paper 2: Results of test of details applied on selected samples

3. Suppose that there are neither high value items nor key items in the population.

4. Complete the required details in Audit Sampling Working Paper for Test of Details
(Working Paper 1) based on the information provided in the Case Study. While some
details were directly given in the Case Study, you have to use the available
information to determine the following:

 Adjusted Population (₱)


 Tolerable Misstatement (₱)
 Expected Misstatement (₱)

 Sample Size

5. According to your calculated sample size, select the samples using Random Selection
method. Use the given table of random numbers (Annex 2) with 639 (col. 6, row 10)
as the Random Number Start (route is down, left to right). List down your selected
samples on Working Paper 2.

6. In Working Paper 2, identify the errors in the selected samples, get the total and
calculate the projected misstatement. Suppose that there are no isolated or anomalous
misstatements to be excluded from projection.

7. Evaluate the results of the sampling procedure you applied (determine whether results
are favorable, with high sampling risk, or unfavorable). Write your evaluation on
Working Paper 1.

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