In this chapter, the learning objectives are: Understand the basic principles of sampling, including the differences between statistical and nonstatistical sampling and sampling and nonsampling risk; understand the basic steps and procedures used in implementing a sampling plan; identify the two situations in which sampling is used in an audit. | Auditing & Assurance Services, 6e Module E Overview of Sampling There are three kinds of lies: lies, damned lies, and statistics. Popularized by Mark Twain (pseudonym of Samuel L. Clemens), famous American writer (1835 – 1910) Sampling Sampling is the process of making a statement about a population of interest by examining only a subset (or sample) of that population When used? The need for exact information is less important The number of items comprising the population is large Sampling Risk Likelihood that the decision based on the sample differs from the decision that would have been made if the entire population were examined Caused by selecting a nonrepresentative sample Can be controlled by Determining an appropriate sample size Ensuring that all items have an equal likelihood of selection Evaluating sample results to control risk Nonsampling risk Likelihood that an incorrect conclusion is drawn for reasons unrelated to the sample Most common cause is mistakes in evaluating sample items Approaches to Sampling Statistical sampling applies laws of probability in selecting sample items and evaluating sample results Allows audit team to control exposure to sampling risk Nonstatistical sampling does not allow audit team to control exposure to sampling risk Both statistical sampling and nonstatistical sampling are appropriate under GAAS Steps in Sampling: Planning Determine the objective of sampling Drawing conclusion about some population of interest (., does brand of golf ball provide increased distance?) Define the characteristic of interest Question of interest to person conducting sampling plan (., golf ball distance) Define the population Item(s) about which question is asked (. all amateur golfers?) Need to ensure population is carefully and completely defined Steps in Sampling: Performing Determine sample size Under statistical sampling, sample size considers desired exposure to sampling risk Select sample items Ensure that all items are | Auditing & Assurance Services, 6e Module E Overview of Sampling There are three kinds of lies: lies, damned lies, and statistics. Popularized by Mark Twain (pseudonym of Samuel L. Clemens), famous American writer (1835 – 1910) Sampling Sampling is the process of making a statement about a population of interest by examining only a subset (or sample) of that population When used? The need for exact information is less important The number of items comprising the population is large Sampling Risk Likelihood that the decision based on the sample differs from the decision that would have been made if the entire population were examined Caused by selecting a nonrepresentative sample Can be controlled by Determining an appropriate sample size Ensuring that all items have an equal likelihood of selection Evaluating sample results to control risk Nonsampling risk Likelihood that an incorrect conclusion is drawn for reasons unrelated to the sample Most common cause is mistakes in .
