How do you apply professional skepticism and judgment in IT audit sampling and testing?

Every aspect of life entails risk because there is always something that could go wrong. Inherent risks arise from management's activities in their normal course of business. Controls should mitigate the risks, but they, themselves may go wrong. The control risk relates to whether the mitigating activity is good enough. And, since the auditors are human too and don't test 100% of all transactions, there's always a chance the audit won't detect all the flaws. That is detection risk. Bottom line: understand what could go wrong with the company's business activities (inherent risk) and their attempts at mitigating such risks (control risk), and what could go wrong with the auditor's approach to the audit (detection risk).

Professional skepticism in audit refers to maintaining a questioning mindset & critically assessing information & evidence. In the context of audit objectives & risk, auditors must approach their work with a healthy skepticism, considering the possibility of errors, fraud, or misstatements. Judgment involves making informed decisions based on the auditor's expertise, experience, & understanding of the audit context. Auditors use judgment to identify & prioritize audit objectives & to assess the significance of risks associated with the IT environment.

If you have reason to be skeptical about your data, imagine that the exceptions you think you should be detecting were carefully hidden away: Now think.

In the realm of IT audit sampling and testing, the application of professional skepticism and judgment is paramount. It entails a meticulous approach to assessing risk, identifying potential areas of concern, and crafting sampling methodologies that ensure comprehensive coverage. Through thoughtful analysis and critical thinking, we navigate through complex data sets, probing for anomalies and irregularities that may signify underlying issues. Our focus remains unwavering, as we uphold the principles of objectivity and integrity in our assessments. By leveraging technology and adopting a discerning mindset, we strive to deliver insights that empower informed decision-making and enhance organizational resilience.

Los métodos y las técnicas de muestreo han ayudado inmensamente a los auditores a realizar sus evaluaciones, sin embargo, actualmente los avances de almacenamiento y procesamiento de datos y las herramientas de análisis de fácil uso permiten buscar evaluaciones a la totalidad del universo auditable como modelo objetivo.

Auditors should critically evaluate the appropriateness of sampling methods & techniques selected for testing IT systems & controls. They should consider factors such as the representativeness of the sample, the reliability of the data, & the potential for sampling errors. Auditors use professional judgment to select appropriate sampling methods based on the objectives, risks, & characteristics of the population being tested. This may involve choosing between statistical & non-statistical sampling techniques & determining sample sizes that provide sufficient coverage & reliability. (e.g., random, stratified, or systematic sampling)

Sampling methods and techniques in IT audit will include statistical sampling, random sampling, systematic sampling, stratified sampling, judgmental sampling, haphazard sampling and block sampling. These are the methods that are used to select a subset of data or transactions for testing, allowing auditors to draw conclusions about the entire population. Mentioned, each method has its own advantages and considerations, and auditors must carefully consider the appropriate sampling approach based on the audit objectives and the characteristics of the population that are being sampled.

No matter what method you use, make sure you document what you did and why! It really helps explain (especially if you are subject to peer review or QC) your method and justification for your testing. A quick memo goes a long way.

The sampling plan should clearly outline the sampling objectives, which specify what the auditor aims to achieve with the sampling process. The sampling unit, which is the individual item or transaction to be tested, must be precisely defined to ensure consistency. The sampling frame, which is the complete list of all items or transactions in the population, should be comprehensive and accurate.

Testing procedures can be a mixture of two or more of these. Whatever testing approach you choose, you must perform such tests that is necessary to arrive at a conclusion that the risk and the audit objectives have been met. What I have found in practice is that inquiry alone is not sufficient testing for any test objective.

We have lot of softwares now a days, we can try to test 100% population like IDEA software is one of the best analytics software can use efficient way to test all population

If you are going to use software and tools to help with your testing, then you need to ensure the completeness and accuracy of the data inputs and outputs. Your testing procedures should cover how you ensured the completeness and accuracy of the data. Without this, outsiders may question the validity of your testing procedures.

Auditors approach testing procedures & tools with a critical mindset, questioning assumptions & verifying the accuracy & effectiveness of the tests conducted. They remain alert to the possibility of manipulation or misrepresentation of test results. Auditors design testing procedures that are tailored to the unique risks & circumstances of the IT environment. They select appropriate testing tools & techniques (e.g., data analytics, vulnerability scans, or penetration testing) based on the nature of the controls being assessed & the objectives of the audit.

As an IT auditor, applying professional skepticism is crucial for effective audit sampling and testing. Here are key steps: Questioning Mindset: Maintain a questioning attitude. Challenge assumptions and seek evidence beyond the obvious. Risk Assessment: Understand the business context, risks, and controls. Tailor testing based on risk exposure. Critical Assessment: Evaluate audit evidence objectively. Consider both fraud and error risks. Third-Party Sources: Use external data (e.g., specialist reports, independent documentation) to corroborate findings. Quality Control: Ensure proper documentation and monitor quality control systems.

In a way, I would opt for reperformance of entity’s IT processes in order to gain enough comfort over their accounts. My professional skepticism will go a long way in not only relying on IPE (information provided by Entity) but verifying the accuracy & completeness of such information.

Are you in a position to be impartial when evaluating audit evidence? Without impartiality, it will be hard to apply the appropriate level of professional skepticism when evaluating audit evidence. You need to feel comfortable pushing back on the auditee and requesting additional clarification or evidence.

In IT audit, applying professional skepticism and judgment during evidence evaluation and documentation is pivotal. Drawing from my experience, it's about questioning the reliability and sufficiency of evidence while keeping an open mind to various possibilities. This critical approach ensures that conclusions are well-founded. For instance, in one audit, skepticism led us to uncover discrepancies in access control logs that were initially overlooked. Documentation, on the other hand, requires precision and clarity, making it easy for others to understand and act upon our findings. This meticulous process not only enhances the audit's credibility but also strengthens the organization's IT governance framework.

In documenting your audit approach, evidence, and approach, you must confirm the factual accuracy of the conclusions you have arrived at. Your documentation must be detailed enough such that a reviewer who was not a part of the initial testing can understand the approach and arrive at the similar or same conclusion as you have. Also apply professional skepticism in evaluating the evidence provided making sure that you have obtained appropriate and sufficient evidence to back your audit conclusion.

Professional skepticism and judgment are critical in auditing. Skepticism involves a questioning mind and alertness to potential misstatements due to error or fraud. It requires viewing information skeptically and assessing its reasonableness and potential conflicts. Professional judgment involves making informed decisions during an audit engagement, interpreting ethical requirements, and applying knowledge and experience. Evaluating evidence involves considering its reliability, sufficiency, and relevance to audit objectives. This enhances the auditor’s ability to detect inconsistencies hence elevating audit quality. In relation to sampling, it drives the auditor to follow the adage "trust but verify" relating to completeness and accuracy.

Make sure you validate your findings early and often and bring them to the attention of the appropriate stakeholders before issuing the final report. Present your findings in a meeting and give your auditee the chance to ask questions and voice their concerns. Try your best to make it as collaborative as possible. The last thing you want to happen is a stakeholder feeling like they were caught off guard when they see the report.

I’ve helped produce hundreds of audit reports in my career, internal IT audits, external IT audits, SOC audits, and more. There is one thing that holds true, no matter the audit…by the time an issue is documented in the final report, it SHOULD BE old news. Said differently, findings should be validated and communicated to the auditee well before it makes it into a final report document. This benefits you and the stakeholder/auditee.

This is going to depend on the audit and standards that need to be followed. In SOC, it's showing the findings and discussing with management (can't change the past). In FedRAMP, it's creating a POA&M list and the client doing remediation of those POA&M before final authorization.

By ensuring that the reporting and communication are timely, accurate, clear, objective, and constructive, the IT auditor can effectively convey the value of the audit and facilitate positive changes within the organization. This final step is essential for driving improvements and ensuring that the audit's insights are put into action.