Prevalence profiling: a judgmental context for evaluating initial sample size projections in the audit context
by Edward J. Lusk; Frank Heilig; Michael Halperin
International Journal of Auditing Technology (IJAUDIT), Vol. 2, No. 1, 2014

Abstract: The basis of the certification audit, in a non-forensic context is a random sample of sufficient size to create the evidence needed to justify the audit opinion. A key variable in executing this Public Company Accounting Oversight Board (PCAOB) best practices sampling requirement is the prevalence of accounts in error and the related error of and in those accounts. In this paper, we present an integrated sampling approach using the COSO-event (the number of accounts in error) and the substantive valued-event (the error in the accounts) perspectives. We focus on creating pre-sample launch decision-making information by examining the false positive and the false negative error indications over various prevalence error-ranges. We have also developed a decision support system (DSS) that we have introduced as part of our academic consulting to a PCAOB certified public accounting LLP and also have used extensively in the delivery of our auditing and assurance course. This DSS is available free as a download and there are no restrictions on its use.

Online publication date: Thu, 28-Aug-2014

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