Final answer:
Tests of controls are emphasized when there's a lack of third-party evidence for payroll transactions. These tests verify the internal controls in place for the payroll process. Statistical sampling techniques help determine probabilities related to audit sampling.
Step-by-step explanation:
The question you asked pertains to the type of audit test that is commonly emphasized when there is a lack of independent third-party evidence related to payroll transactions. In this scenario, Tests of controls are typically emphasized.
Auditors place emphasis on testing the effectiveness of the controls that the organization has put in place to ensure that payroll transactions are processed correctly. This involves verifying procedures such as authorization, timeliness, accuracy of payroll calculations, and the overall integrity of the payroll process. Without sufficient third-party evidence, the auditor relies more heavily on these tests to gain assurance over the completeness and accuracy of the payroll transactions.
Calculating Probabilities
With regards to calculating probabilities such as the chance that no one was audited or that at least three were audited, the auditor would use statistical sampling techniques to make these determinations. These calculations would be based on the total population and the sample size i.e., how many are expected to be audited.