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Microlesson · 5-min read

Selecting Specific Items from a Population — Audit Sampling

## Selecting Specific Items from a Population

When designing tests of controls and tests of details, the auditor must determine items for testing. One approach is to select specific items from a population (as distinct from statistical sampling of all items).

### Factors Relevant to Selecting Specific Items

1. The auditor's understanding of the entity

2. The assessed risks of material misstatement

3. The characteristics of the population being tested

### Types of Specific Items to Select

CategoryDescription
High value or key itemsItems of high monetary value or exhibiting a specific characteristic (e.g., related party transactions, unusual entries)
All items over a certain amountExamine every item above a threshold to verify a large proportion of the total class of transactions or account balance
Items to obtain informationExamine items to understand the nature of the entity or the nature of certain transactions

### Important Caveat

Specific item selection does not constitute audit sampling in the statistical sense — conclusions drawn from specific items cannot be projected to the entire population. The auditor should be aware that untested items may still contain misstatements.

Worked example

### Example 1

Scenario: M/s KLM & Co. audit MN Ltd. For testing trade payables: (i) They select all invoices above ₹10 lakhs ('all items over a certain amount') to cover 80% of the total payables balance; (ii) They specifically select all transactions with a related party supplier ('high value/key items') regardless of amount; and (iii) They select a few small, unusual items from a new supplier to understand the nature of the new relationship ('items to obtain information'). They remain aware that the remaining small invoices have not been tested and could still contain misstatements.

⚠️ Common exam mistakes

  • Projecting findings from specifically selected items to the entire population — you can only draw conclusions about the items actually tested.
  • Selecting only high-value items and concluding the entire balance is fairly stated — numerous small misstatements can in aggregate be material.
  • Confusing specific item selection with statistical sampling — the two have fundamentally different implications for the conclusions that can be drawn.
Reference:
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