Auditing Audit Sampling – tryspring

By | August 28, 2019

Auditing – Audit Sampling

These days, auditors may not go for detailed examination and
verifications of records. With the introduction of efficient
internal control system in organizations, Auditors pick selective
portion of entries out of complete data for making judgement on
the complete data.

Checking of all transaction and verifying entries and record of
the business was a common practice in earlier years; this is
almost obsolete in the present modern system of auditing. Since
there is no statutory obligation for the Auditor to check whole
transactions, thus the Auditor decides at his own level about the
extent to which checking should be applied.

What is Audit Sampling?

Sampling is a technique, based on the assumption that, by and
large, every sample has almost the same characteristics of the
complete data it is representing. Sampling means the selection
and verification of a portion of accounting entries and records
out of total similar data. It provides reasonable basis to the
Auditor to conclude about the population.

An Auditor may apply test checks where adequate internal
control system is adopted by the organization and it is widely
accepted in accounting and auditing profession. In it, the
Auditor goes for selective verification instead of checking all
the entries in the books.

No doubt, this technique may provide a certain degree of
reliability instead of complete reliable results. If, there is a
satisfactory internal control system in any organization, a
lesser degree of reliability of sample result may be acceptable.

Test Checking

Nature, size and materiality of transactions are the basis, which
are kept by the Auditor in his mind for his own judgements for
selecting a sample of entries to be checked. Normally, accounts
having material impact and entries involving large amounts are
checked thoroughly and balance entries are checked on at random

The advantage of this technique is that if any error or fraud
detected out of unchecked entries will not create any material
impact on fairness and truth of financial statements. Disclosure,
presentation, accounting standards, provision of law and
arithmetical accuracy are other aspects on the basis of which,
the Auditor gives his judgement.


Following precautions must be taken to apply test checking

  • Selected transactions for test check plan should be free from
    any bias.

  • Number of transactions includes in test check should be on
    the basis of the experience of an Auditor.

  • Purpose of voucher checking should be based on the clear
    objectives of authorization or payment made or recording in
    the books.

  • Transactions might be classified in sub-group, in case where,
    there is a wide variety of transactions in a group.

  • Some transactions should be identified during audit and those
    are to be checked thoroughly.

  • During audit, if any error or fraud is identified, those
    should be further investigated thoroughly.

  • Internal control system of organization should be studied
    thoroughly to decide at what extent the test checks are to be

  • Complete procedures and processing of transactions should be
    studied from starting to end.

What is Statistical Sampling?

Statistical sampling refers to an approach to sampling that has
the following characteristics −

  • Random selection of sample items, and

  • The use of probability theory to evaluate sample results,
    including measurement of sampling risk.

Sampling without the above characteristics is to be considered as
a non-statistical approach. Whatever may be the sampling
approach, the sample must be similar to the larger data it
represents? Non-statistical sampling is neither scientific nor
objective. Reliability of audit objectives can be measured in
statistical sampling.

Advantages of Statistical Sampling

Following are the advantages of Statistical Sampling −

  • Increase in the size of population does not mean increase in
    sample size.

  • Indication of specific risk and precision are associated with
    estimation of minimum sample size.

  • This technique is free from any association of human bias.

  • With minimum efforts, cost and time, it provides maximum

  • Sample represents the whole population.

  • For verification of work-in-progress and inventory, it is a
    very useful technique because total errors can be predicted
    on the basis of errors in the sample.


Following are the limitations of statistical sampling −

  • Without effective and adequate internal control system, this
    technique cannot work properly.

  • Without adequate size and sample, result of it can be

  • This technique requires more time and energy which is not
    practical in certain situations.

Prerequisites of Statistical Sampling

Following are the prerequisites of Statistical Sampling −

  • Every item in population has equal chance of selection for
    sampling and each selected item for sample is of equal

  • There must be an appropriate size of sample to enable the
    Auditor to form an opinion about the genuinity of financial

  • Sample should be representative of the whole population.

Important Points From SA-530

Let us now discuss a few important points from SA-530.

Sample design, size and selection of items for testing

When designing an audit sample −

  • the Auditor shall consider the purpose of the audit
    procedures and the characteristics of the population from the
    which the sample will be drawn.

  • the Auditor shall determine a sample size sufficient to
    reduce sampling risk to an acceptably low level.

  • the Auditor shall select items for the sample in such a way
    that each sampling unit in the population has a chance of

Performing Audit Procedures

The Auditor shall perform audit procedures, appropriate to the
purpose, on each item selected. If the audit procedure is not
applicable to the selected item, the Auditor shall perform the
procedures on a replacement item.

It the Auditor is unable to apply the designed audit procedures,
or suitable alternative procedures, to a selected item, the
Auditor shall treat that item as a deviation from the prescribed
control, in the case of tests of controls, or a misstatement, in
the case of tests of details.

Nature and cause of deviation and misstatement

The Auditor shall investigate the nature and causes of any
deviations or misstatements identified, and evaluate their
possible effect on the purpose of the audit procedure and on
other areas of the audit.

In extremely rare circumstances when the Auditor considered a
misstatement or deviation discovered in a sample to be an
anomaly, the Auditor shall obtain a high degree of certainty that
such misstatement or deviation is not representative of the
population. The Auditor shall obtain this degree of certainty by
performing additional audit procedures to obtain sufficient
appropriate audit evidence that the misstatement or deviation
does not affect the reminder of the population.

Projecting Misstatement

For the test of details, the Auditor shall project misstatements
found in the sample to the population.

Evaluating Results of Audit Sampling

The Auditor shall evaluate −

  • The results of sample, and

  • Whether the use of audit sampling has provided a reasonable
    basis to conclude that the larger population has been tested.

Methods of Sample Selection

Following methods can be used for sample selection −

  • Systematic Random Sampling
  • Random number Table
  • Stratified Random Sampling
  • Systemic sampling
  • Haphazard sampling

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