Introduction
Audit sampling means selecting and examining less than 100% of items in a population to obtain audit evidence. The auditor uses the results of the selected sample to form a conclusion about the entire population.
Objective of Audit Sampling
The auditor uses audit sampling to obtain a reasonable basis for drawing conclusions about the population from which the sample is selected.
Designing an Audit Sample
First, the auditor designs the sample by considering the objective of the audit procedure and the characteristics of the population.
In many cases, the auditor may divide the population into smaller groups with similar features. This process is called stratification, and it helps the auditor perform sampling more efficiently.
Determining Sample Size
While deciding the sample size, the auditor considers three important factors:
- Sampling Risk – the risk that the auditor’s conclusion based on a sample may differ from the conclusion if the entire population were tested.
- Tolerable Error – the maximum error the auditor is willing to accept in the population.
- Expected Error – the level of error the auditor expects to exist in the population.
If the auditor expects more errors, the auditor should select a larger sample size.
Selection and Testing of Samples
Next, the auditor selects sample items in such a way that each item in the population has an opportunity to be selected. This ensures that the sample represents the population.
After selection, the auditor performs the relevant audit procedures on each selected item.
Evaluation of Results
After testing the sample, the auditor should:
- Analyse errors or deviations found in the sample.
- Project those errors to the entire population.
- Reassess the level of sampling risk.
If the auditor identifies deviations or misstatements, the auditor should investigate their nature and cause and assess their impact on the audit objective. If an error appears unusual, the auditor must confirm that it is not representative of the population.
Conclusion
Audit sampling helps the auditor obtain sufficient and appropriate audit evidence without examining every transaction. By carefully designing the sample, selecting representative items, and properly evaluating the results, the auditor can draw reliable conclusions about the entire population.