This document discusses audit sampling, which involves selecting a subset of data from a population to make inferences about the whole population. It defines audit sampling and explains that it provides information on how many items to examine, which items to select, and how to evaluate sample results. The document outlines the general approaches of statistical and non-statistical sampling and explains key steps like planning, selecting, and evaluating a sample. It also discusses factors that affect sample size and how to project errors in a sample to the overall population.

1. AUDIT SAMPLING
P R E PA R E D BY M U R O D U L LO
T U R D I Y E V. G R O U P H B A - 8 1 I

2. LEARNING OBJECTIVES
• 1. Definition and features
• 2. General approach sampling to
• 3. Planning and designing the sample
• 4. Factors affecting the sample size
• 5. Projecting the error

3. WHAT IS AUDIT SAMPLING?
• Audit sampling:
• Process of selecting a subset of a
population (entire set of data) of items for
the purpose of making inferences to whole
population.
• The process of using auditing procedures
to less than 100 per cent of various items in
a company's account balance such that
each unit may have an equal opportunity of
being selected.

4. 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 in order to tell us something about
the population (e.g. level of misstatement)

5. BASIC CONCEPTS OF SAMPLING

6. WHEN IS SAMPLING USED?
• Sampling is generally used in field audits when it is
not efficient to review 100% of the records. Sampling
may also be used if records are missing or other
circumstances make reviewing all of the records
difficult.

7. PURPOSE OF AUDIT SAMPLING
• Audit sampling help auditors on doing their audit work at a
given period of time. It is possible for auditor to make details
examination on all the items being examined.
• To gather or get the evidences from the audit procedures
being performed. Sampling is only the method (efficient) or
sources of the evidence.
• To detect error and any materially misstatements.

8. Representative And
Non – Representative Sample
• A representative sample is one in which the characteristics in
the sample of audit interest are approximately the same as
those of the population.
• Two things cause a sample to be non-representative:
• ► Non-sampling risk
• ► Sampling risk

9. SAMPLING AND NON-SAMPLING
RISKS
• Sampling risk: the probability that the auditor has reached an incorrect
conclusion because audit sampling was used rather than 100%
examination (i.e. correctly chosen sample was not representative of the
population).
• 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 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.

10. GENERAL APPROACHES TO
SAMPLING
STATISTICAL VS
NON-STATISTICAL SAMPLING

11. STATISTICAL AND
NON-STATISTICAL SAMPLING
• Statistical sampling means any approach to sampling that has the
following characteristics:
• random selection of a sample; and
• use of probability theory to evaluate sample results, including
measurement of sampling risk.
• Non-statistical sampling means an approach to sampling that does
not have the above characteristics.
• In non-statistical sampling, the auditor uses judgement in selecting the
sample size and in interpreting the results against the audit objective.

12. NON-STATISTICAL SAMPLING
• Statistical sampling means any
approach to sampling that has
the following characteristics:
• random selection of a sample;
• use of probability theory to
evaluate sample results,
including measurement of
sampling risk.

13. STATISTICAL
• Applies laws of probability
• Sampling risks are
quantified
• Costly
NON-STATISTICAL
SAMPLING
• Based on judgment
• Sampling risks are not
quantified
• Less costly & easy to use

14. IN SAMPLING THE AUDITOR TYPICALLY
UNDERTAKES THREE COMMON STEPS
• 1. Planning the sample;
• 2. Selecting and testing the sample; and
• 3. Evaluating the sample.

15. PLANNING THE SAMPLE
• determining the objectives of the test;
• defining what errors are being sought (=search);
• identifying the population and sampling unit;
• specifying the tolerable error, expected error
• and required confidence level; and
• deciding the size of the sample

16. SAMPLE SELECTION METHODS
PROBABILISTIC
• The auditor randomly selects items
such that each population item has a
known probability of being included in
the sample. This process requires
great care and uses one of several
methods discussed shortly
• Random sample selection
• Systematic sample selection
• Probability proportional to size
• Stratified sample selection
NON-PROBABILISTIC
• The auditor selects sample
items using professional
judgment rather than
probabilistic methods. Auditors
can use one of several Non-
probabilistic sample selection
methods:
• Directed sample selection
• Haphazard
• Block sample

17. RANDOM SELECTION
• Generally considered to be the best method of obtaining a
sample to evaluate the results statistically.
• Each item in the population has a known (usually equal)
chance of selection.
• Auditing software can be used to select random samples.

18. SYSTEMATIC SAMPLE SELECTION
• the auditor calculates an interval and then selects the items for the
sample based on the size of the interval. The interval is determined by
dividing the population size by the desired sample size.
• Interval = population size/ sample size
• Easy to use
• Possibility of bias - once the first item in the sample is selected, all other
items are chosen automatically.

19. HAPHAZARD SAMPLE SELECTION
• Selection of a sample without following a structured
technique.
• Is only practical when the population is not ordered in any
numerical sequence.
• This method is not recommended where other methods are
available.

20. TESTING THE SAMPLE AND
EVALUATING RESULTS
• Having drawn the sample, the auditor then examines or tests
each item in accordance with the required audit objective.
• Each error or deviation needs to be evaluated as to its
implications.
• For each error, the auditor must consider whether the error
has an effect on the whole population or is an isolated or
localized occurrence.

21. FACTORS AFFECTING THE SAMPLE SIZE
Population Size
• This is only relevant in very small populations.
Level of confidence
• Even a 100% sample will not give complete assurance .Auditors work to
level of confidence which can be expressed precisely .
Precision
• Clearly the level of confidence and the precision interval are related in
that for a given sample size higher confidence can be expressed in a wider
precision interval and vice versa.

22. Risk
• Risk is a highly important concept in modern auditing and in high risk
areas a large sample will be desirable.
Materiality
• Materiality is fundamental to modern auditing and with allpopulations
being sample, materiality should be considered in fixing the sample size.
Subjective factors
• This is most important and yet difficult area of consideration .The auditor
expects to gain audit evidence about a population from a sample.
Expected error/deviation rate
• The theory requires that the samples size required is a function of the
error .This is only known after the results have been evaluated .However an
estimate based on previous experience and knowledge of other factors may
give a good indication

23. PROJECTING THE ERROR TO THE
POPULATION
• When the analysis identifies errors consistent with the objective of the
test, the auditor then draws conclusions as to the population.
• Test of control
• A projected deviation rate should be estimated.
• If the projected deviation rate exceeds the tolerable deviation rate, the
preliminary assessment of control risk is not confirmed more substantive
tests will be required

24. SUBSTANTIVE TESTS
• The sample results are projected to the population.
• The most common method is the difference estimation
method.
• This method looks at the relative differences between the
recorded and audited amounts.
• If the projected error approaches or exceeds the tolerable
error, more evidence may be necessary.

25. USED SOURCES:
• Arens, Elder, Beasley. Auditing and assurance services book.
• Gey, Semnati. Auditing and assurance services book
• accaglobal.com (website)
• Accountingtools.com (website)

26. THANKS FOR YOUR
ATTENTION!