Audit Sampling

Audit Sampling

1. DEFINITION: Application of audit procedure

   • Test less then 100% items within account balance or class of transaction
     • Purpose: To draw general conclusion based on characteristics detected in sample
       • Reduced cost and time incurred

2. Representative Sampling

   • Characreristics of sample similar to those of population
   • 2 Factors causes Non-representative
     • Non-sampling Risk
       • Risk that audit test do not uncover existing exceptions in sample
     • Sampling Risk
       • Risk that auditors reaches incorrect conclusion because sample is non-representative of population

3. Statistical Sampling

   • Apply law of probability theory in designing sampling & evealuating results
   • Mathematically evaluating outcome to measure sample results are representative of population
   • Probabilistic Sample Selection (Each population item has a known probability of being selected as sample)
     • Simple Random Number Selection
     • Systemaic Sample Selection
     • Probability proportional to size
     • Stratified Sample

4. Non-statistical Sampling

   • Solely depends on auditors judgement
   • Non-probabilistic Sample Selection
     • Direct Sample Selection
     • Block Sample Selection
     • Haphazard Sample Selection

5. Application of Sampling in Audit

   • Attribute Sampling
     • Test controls (qualitative)
       • Sampling Risk
         • Risk of Underreliance
           • Not relying on internal control, but in fact must
         • Risk of Overreliance
           • Use internal control, even not needed
   • Variables Sampling
     • Test Account Balance (quantitative)
       • Sampling Risk
         • Risk of Incorrect Rejection
           • Sample indicate account balance materially misstated even through fairly stated
         • Risk of Incorrect Acceptance
           • Sample indicates account balance fairly stated even though is materially misstated