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SECTION 4; _SPECIFEC AUi}IT APPROACH I AND METHODOLOGY. <br />Considering audit approaches other <br />than using audit sampling (e.g,, use of <br />computer- assisted audit techniques <br />(CAATs)). <br />• Defining the population and defining <br />the sampling item. <br />• Assessing the overall risk level for <br />related control, analytical procedures <br />and risk assessment activities. <br />• Determining materiality as a base for <br />calculating the tolerable misstatement <br />(error). <br />• Selecting items for 100% examination. <br />• Determining the sample size, <br />considering factors such as: <br />• Expected misstatement (errors) to <br />be found. <br />• The effect of other tests on the <br />account being tested. <br />MGO encourages the use of statistical <br />sampling whenever practical especially <br />for substantive tests. We use two <br />primary substantive statistical sampling <br />techniques - PPS ( "Probability <br />Proportional to Size ") sampling and <br />SRS ( "Stratified Random Sampling "). <br />We generally first remove all individual <br />items in excess of 90% of the tolerable <br />misstatement from the population for <br />100% examination prior to selecting a <br />sample, for both PPS and SRS samples. <br />In summary our sampling procedures <br />include the following: <br />• Define the Objective <br />• Define the Population and the Sampling <br />Unit <br />• Define Tolerable Misstatement <br />• Remove Items for 100% Examination <br />• Specify the Desired Level of Sampling <br />Assurance and the Acceptable Risk of <br />Overauditing <br />• Estimate the Expected (Anticipated) <br />Misstatement <br />• Select the Sampling Technique (e.g., <br />non - statistical, PPS, SRS) <br />• Determine the Sample Size <br />• Select the Sample <br />+ Examine the Sample Items and Evaluate <br />the Sample Results <br />cas•,.ma 35 <br />