AUDIT SAMPLING

Audit Sampling – Meaning – Application of audit procedure on Less than 100% of items within a class of tr./A/c. Balance
 It may be statistical or non-statistical.
 It requires skill and competence on part of auditor.
 Auditor should try his level best to choose sample which should be true representative of population.
 Choosing all items above certain amount is not sampling.
Design of Audit Sample – It depends on following :
(i) Audit Objective – Specific objective and procedures.
(ii) Population – It should be appropriate.
(iii) Stratification – Dividing heterogeneous (different characteristics) population in more homogeneous (similar characteristics) sub-population. For getting same level of assurance, it results in smaller sample size.
Sampling Units – Individual units constituting the population.
Size of Sample – Auditor should consider overall population, tolerable error, expected error and sampling risk.
Method of Sampling – Each item in population should have equal chances of being chosen. Thus –
(1) Random Sample – use of random no table. Each sampling unit has equal probability of being selection.
(2) Systematic Sample – Having fixed interval, between any consecutive units selected. However, it can be adopted only when population is not structured in a way that it corresponds to a particular trend.
(3) Haphazard Selection – No intention to include/exclude a particular item. Equivalent to (1).
Expected Error - If auditor expects error in sample – larger sample size, otherwise smaller sample size.
Tolerable Error – Maximum Error in population that auditor is ready to accept for a given sample size.
Evaluation of Sample Results – Steps are as follows :
Ist, Step – Analysis of Error in Sample –
 Judge whether an item is error or not.
 If sufficient and appropriate evidence can’t be obtained regarding a specific item, it could be an error.
 Auditor to check < cause of error and its impact on other phases of audit.  Common trend in error  extended procedures. IInd Step – Projection of Error –  Project it to entire population by appropriate method.  Consider both quantitative and qualitative aspects of error found while projecting. IIIrd Step – Reassessing Sampling Risk –  If error in population > tolerable error;
 Either revise sampling risk or extend audit procedure.
Sampling Risk - It arises from possibility that auditor’s conclusion based upon sample may be different from conclusion that would have been reached if complete population were subjected to same audit procedure.
 If auditor willing to accept less risk  large size of sample to be chosen.
 It is always there in sampling..
Sampling Risk
In Compliance Procedure Risk of under reliance Risk of over reliance
In Substantive Procedure Risk of incorrect rejection Risk of incorrect acceptance