Audit sampling requires that the auditor collect only a relatively small sub-sample of data, thereby initiating...

60.1K

Verified Solution

Question

Accounting

Audit sampling requires that the auditor collect only arelatively small sub-sample of data, thereby initiating detectionrisk, i.e., the risk. . . that, based on the sample the auditortakes, the auditor will fail to detect a material misstatement inthe financial statements. Data analytics seems to present a panaceato that notion of risk because, by auditing 100% of the sample,detection risk by definition is lower.
It seems like data analytics is the perfect answer to the auditrisk problem. So, comment on a variety of reasons that auditorsmight not be willing to rely on data analytics to drive audit riskdown.
Which do you think is costlier: sampling or data analytics?What are the different costs between sampling and dataanalytics?
What role does cost-benefit play in the choice betweenemploying statistical sampling versus data analytics?
Data analytics enables auditors to audit all transactions,rather than just a sample of transactions.
Do you think that as the use of data analytics increases onaudit engagements, the need for sampling will decrease?
What role might the PCAOB or AICPA play in helping auditorsdetermine when and how to incorporate data analytics into theaudit?

Answer & Explanation Solved by verified expert

4.3 Ratings (701 Votes)

Answer to i Reasons for auditors not to rely on data analytics 1 Cost effectiveness of data capturing process In Audit sampling data is retrieved straight from client and then assessed for its accuracy completeness and relevance While in data analytics data extraction needs to be done at a deeper level using databases and then analysed into meaningful conclusions As we see into corporations databases are kept highly secured on a need to know basis along with multiple restrictions regarding usage electronic transfer etc In this scenario clients make it tedious for auditors to capture required analysis and data banks in a cost effective and timely way 2 Audit Evidence conflicts See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member