Question

Testing less than 100 per cent of a population for the purpose of making inferences about that population? for auditing definition

Answer 1

THIS CONTEXT IS RELATED TO AUDIT SAMPELING.

Audit sampling refers to the application of audit procedures to less than 100% of items within a population of audit relevance such that all sampling units have a chance of selection in order to provide the auditor with a reasonable basis on which to draw conclusions about the entire population.It is often necessary to draw a sample of information from the whole population to enable a more focused examination to take place. For instance, if the auditor of a bank checks each of the transactions of the bank, it would not be feasible to do so without incurring enormous cost and expending lot of time.During audit planning for areas with a high number of transactions or large quantities of evidence for evaluation, the auditor should consider the use of sampling techniques. Since there are many variations to audit sampling, only a few common types are being discussed in this Implementation Guide along with the procedures for determining the right sample size to adequately represent the target population and develop conclusions. However, a discussion of sampling risks and concepts will precede the details of sampling types since this understanding is important for developing an appropriate sampling technique.

“An effective sample test provides appropriate audit evidence to an extent that, taken with other audit evidence obtained or to be obtained, will be sufficient for the auditor’s purposes. In selecting items for testing, the auditor is required to determine the relevance and reliability of information to be used as audit evidence; the other aspect of effectiveness (sufficiency) is an important consideration in selecting items to test. The means available to the auditor for selecting items for testing are: (a) Selecting all items (100% examination); (b) Selecting specific items.

Sampling can provide a valid, defensible methodology but it is important to match the type of sample needed to the type of analysis required. The auditor should also take care to check the quality of the information from which the sample is to be drawn. If the quality is poor, sampling may produce reliable results.

Statistical Sampling:

“Although statistical sampling furnishes the auditor with a measure of precision and reliability, statistical techniques do not define for the auditor, the values of each to provide audit satisfaction. Specification of the precision and reliability necessary in a given test is an auditing function and must be based upon judgment in the same way as is the decision as to audit satisfaction required when statistical sampling is not used. The use of statistical sampling does not reduce the use of judgment by the auditor, but provides certain statistical measurements as to the results of audit tests, which measurements may not otherwise be available.”

Statistical sampling methods include:

a) Random sampling

b) Systematic random sampling

c) Stratified sampling

d) Value-weighted Selection

Non Statistical Sampling

It is a sampling approach that does not have characteristics of:

a) Random selection of the sample items.

b) Use of probability theory to evaluate sample results including measurement of sampling risk, is considered non-statistical sampling.

Non-Statistical techniques include

a) Haphazard sampling

b) Block selection

c) Judgment selection