Audit Method: Sampling

Audit sampling as defined by ISA 530 is “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.”

The means available to the auditor for selecting items for testing are;

• Selecting all items (100% examination)
• Selecting specific items; and
• Audit Sampling

Audit sampling can be applied using either non-statistical or statistical sampling approaches.

Statistical approach has the following characteristics:

• Random selection of the sample items; and
• The use of probability theory to evaluate sample results, including measurement of sampling risk.

 A sampling approach which does not possess the above characteristics is called non-statistical sampling.

Steps in planning the sample are as follows:

• Determining the objectives of the test;
• Defining what errors or deviation are being sought;
• Identifying the population and sampling units; and
• Deciding the size of the sample.

Generally, larger the size of the sample, the more it will be representative of a population. Many audit firms would like to standardize the size of sample based on general and specific risk factors. Errors increase the imprecision of results from sampling. Therefore, if they are expected, a larger sample size is required. Finally in evaluating misstatements, the auditor, should exclude ‘anomalous’ error(s) which are misstatement or deviation that are demonstrably not representative of misstatements or deviations in a population from his projected misstatements. However, such errors may be considered when evaluating all misstatements within the sample and auditors shall obtain sufficient appropriate audit evidence to corroborate the fact that an error or deviation is anomalous.

Practice

Auditors need to consider the specific objectives to be achieved and the combination of audit procedures that is most likely to achieve those objectives. Audit sampling is applicable to both tests of control and substantive procedures.