Definition
AU-C 500 lists selecting specific items as one of three ways to choose items for testing, along with testing all items and audit sampling. Items are chosen for a reason: high value, past errors, unusual terms, related parties, or round amounts. The selection is judgmental, so it does not constitute audit sampling.
Why it matters in an audit or review
Key items often make up a large share of the balance, so testing them gives high coverage with few items. The auditor must still consider the remaining items. If the untested remainder could contain a material misstatement, further procedures such as sampling or analytics are needed.
Example
A $5 million receivables ledger has 12 balances above $150,000 totaling $2.4 million (illustrative). The auditor confirms all 12, achieving 48 percent coverage. The remaining $2.6 million is made up of 380 smaller balances, and the auditor samples 40 of them. The two results are evaluated separately.
Common mistakes
- Projecting results from key items to the remaining population.
- Defining key items and then not documenting why the rest need no testing.
- Selecting items so predictable that management can anticipate them.
FAQ
How much coverage is enough?
There is no fixed percentage. It depends on risk and on how much untested balance could still hide a material error.
Sources
- AICPA, AU-C Section 500, Audit Evidence (means of selecting items for testing)
- AICPA, AU-C Section 530, Audit Sampling
- AICPA, AU-C Section 330, Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained
Definitions paraphrase AICPA and FASB guidance; read the standard itself before relying on a requirement. Example figures are illustrative. This page is guidance, not professional advice. Report an error