Audit Sampling Overview

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Questions and Answers

What characterizes non-statistical sampling?

It involves selecting items based on professional judgment. (correct)

It ensures every item in the population has an equal chance of selection.

It mandates adherence to mathematical principles.

It relies solely on numerical data analysis.

Which method involves dividing a population into subgroups for sampling?

Probability proportional to size selection

Simple random sample selection

Directed sample selection

Stratified sample selection (correct)

What does probability proportional to size sampling take into consideration?

An equal number of items from each subgroup.

Selection frequency of items in the population.

The size of each item within the population. (correct)

Random distribution of items selected.

In which phase of audit sampling does the auditor select the sample and perform tests?

Select the sample and perform the tests Signup and view all the answers

What is a potential risk of non-statistical sampling methods?

More subjectivity in item selection Signup and view all the answers

Which of the following best describes systematic sample selection?

Selecting items at regular intervals calculated from the population size Signup and view all the answers

What distinguishes probabilistic sample selection from non-probabilistic sample selection?

Probabilistic methods allow for equal chances of selection. Signup and view all the answers

Which sampling method is based on the auditor's discretion to choose relevant items?

Judgment sampling Signup and view all the answers

What is a characteristic of block sample selection?

The first item is selected and the rest are chosen in sequence. Signup and view all the answers

Which non-statistical sampling method allows for auditor discretion in item selection?

Directed sample selection Signup and view all the answers

What does sampling risk refer to in an audit context?

The potential for failure to uncover errors within the sample. Signup and view all the answers

When the desired confidence level increases in non-statistical sampling, what is the likely outcome?

The sample size increases. Signup and view all the answers

Which of the following presents a risk unique to non-sampling errors?

Failure to recognize exceptions in the sample. Signup and view all the answers

Statistical sampling helps auditors primarily by achieving which of the following?

Measuring the sufficiency of the audit. Signup and view all the answers

What is the main distinction between probabilistic and non-probabilistic sampling methods?

Probabilistic sampling provides a way to assess sampling risk. Signup and view all the answers

Which statement best describes haphazard sample selection?

It is characterized by random selection without bias. Signup and view all the answers

Which of the following is a characteristic of non-statistical sampling?

Judgment is used to select sample items Signup and view all the answers

What is the main goal of audit sampling?

To select a representative sample of the population Signup and view all the answers

What defines sampling risk in audit sampling?

The risk that the sample is not representative of the population Signup and view all the answers

Which of the following is NOT a method of probabilistic sample selection?

Judgmental sample selection Signup and view all the answers

Which statement correctly differentiates probabilistic from non-probabilistic sampling?

Probabilistic sampling provides a known probability for each item being selected. Signup and view all the answers

What is a potential drawback of non-statistical sampling?

It is subjective and can lead to bias. Signup and view all the answers

In audit sampling, which risk is associated with sample results that are generalizable to the population?

Sampling risk Signup and view all the answers

What factor is NOT typically included when assessing audit risk?

Size of the audit firm Signup and view all the answers

Study Notes

Audit Sampling

Audit sampling is the application of an audit procedure to less than 100% of the items within an account balance or class of transactions.
Auditors must ensure the sample selected is representative of the entire population.
A representative sample ensures the findings apply to the broader population.
Two approaches are statistical and non-statistical sampling.

Statistical Sampling

Sample size must be determined objectively and quantitatively.
Sample members must be selected randomly.
Sample results must be evaluated mathematically.
The sample must be probabilistic.
Mathematical rules allow auditors to quantify sampling risk in planning the sample and evaluating results.
Probabilistic sampling ensures each population item has a known probability of being included in the sample.
Common probabilistic sampling methods include simple random, systematic, probability proportional to size, and stratified.
- Simple random: Every possible combination has an equal chance of selection. Used when items need no emphasis.
- Systematic: An interval is calculated then items are selected sequentially. Population size is divided by the desired sample size.
- Probability proportional to size: Accounts for varying sizes within the population when selecting the sample.
- Stratified: Divides the entire population into subgroups, then randomly selects sample items from each group.

Non-Statistical Sampling (Judgement Sampling)

A non-statistical sample does not meet one or more criteria of statistical sampling.
Auditors choose sample items they believe provide most useful information given the circumstances; reaching conclusions judgmentally.
Non-probabilistic sampling methods are used including directed, block, and haphazard.
- Directed: Auditors deliberately select items based on their own criteria, avoiding random selection.
- Block: The first item in a block is selected, then the rest of the items are chosen sequentially.
- Haphazard: Items are selected without conscious bias by the auditor.

Audit Sampling Phases

Planning the sample.
Selecting the sample and performing tests.
Evaluating the results.
- Example illustration: An auditor selects a sample of 2,050 invoices and finds 205 exceptions.

Audit Sampling Risks

Sampling Risk: Risk of reaching an incorrect conclusion due to a non-representative sample; can be controlled via adjusting the sample size and using appropriate selection methods. - Causes of sampling risk: The sample is not representative of the population.
Non-Sampling Risk: Risk that audit tests do not uncover existing exceptions; can arise from the auditor's failure to recognize exceptions or because of inappropriate/ineffective audit procedures. - Example: Selecting an invoice sample needing duplicate shipping docs and concluding there are no exceptions. - Causes of non-sampling risk: Auditor's failure to recognize exceptions, ineffective audit procedures.

Quiz Questions and Answers (Examples)

An advantage of statistical sampling over non-statistical: Measuring the sufficiency of audit evidence by quantifying sampling.
Which best illustrates sampling risk? A randomly chosen sample may not be representative of the whole population for the characteristic of interest.
In non-statistical sampling, increasing the desired confidence level: Results in a larger sample size.

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Description

This quiz covers the fundamentals of audit sampling, including the importance of selecting a representative sample and the differences between statistical and non-statistical sampling methods. It delves into the various probabilistic sampling techniques and the significance of quantifying sampling risk in audits.