Chapter 11 - Audit sampling. After studying this chapter you should be able to: define audit sampling and its objective and describe the requirements that apply to all audit samples - statistical and non-statistical, identify the various means of gathering audit evidence, identify factors influencing the determination of sample size,. | CHAPTER 11 AUDIT SAMPLING AUDIT SAMPLING DEFINED Audit sampling is the application of an audit procedure to less than 100 per cent of the items within a population to obtain audit evidence about particular characteristics of the population. Ref.: AUS 514/ISA 530 IMPORTANCE OF AUDIT SAMPLING Audit sampling is important because it provides information on: How many items to examine Which items to select How sample results are evaluated and extrapolated to the population SAMPLING RISK DEFINED Sampling risk is the probability that the auditor has reached an incorrect conclusion because audit sampling was used rather than 100 per cent examination (. correctly chosen sample was not representative of the population). NON-SAMPLING RISK DEFINED Non-sampling risk arises from factors other than sample size that cause an auditor to reach an incorrect conclusion, such as the possiblility that: The the auditor will fail to recognise misstatements included in examined items The auditor will therefore apply a procedure that is not effective in achieving a specific objective CHARACTERISTIC OF INTEREST When sampling, the auditor identifies a particular characteristic of the population to focus on. For tests of control the characteristic of interest is the rate of deviation from an internal control policy or procedure. For substantive tests, the characteristic of interest is monetary misstatement in the balance. VARIOUS MEANS OF GATHERING AUDIT EVIDENCE 100% examination — this is not a sampling method. Selecting specific items — . high value or high risk — this is not a sampling method. Items selected will not be representative of the population. Audit sampling. STATISTICAL SAMPLING DEFINED Any approach to sampling that has the following characteristics: (a) Random sample selection; and (b) Use of probability theory to evaluate sample results, including measurement of sampling risk. Major advantage of statistical sampling over non-statistical sampling | CHAPTER 11 AUDIT SAMPLING AUDIT SAMPLING DEFINED Audit sampling is the application of an audit procedure to less than 100 per cent of the items within a population to obtain audit evidence about particular characteristics of the population. Ref.: AUS 514/ISA 530 IMPORTANCE OF AUDIT SAMPLING Audit sampling is important because it provides information on: How many items to examine Which items to select How sample results are evaluated and extrapolated to the population SAMPLING RISK DEFINED Sampling risk is the probability that the auditor has reached an incorrect conclusion because audit sampling was used rather than 100 per cent examination (. correctly chosen sample was not representative of the population). NON-SAMPLING RISK DEFINED Non-sampling risk arises from factors other than sample size that cause an auditor to reach an incorrect conclusion, such as the possiblility that: The the auditor will fail to recognise misstatements included in examined items The .
