Audit sampling: the application of an audit procedure to less than 100% of the items within a population to obtain audit evidence about particular characteristics of the population Audit sampling is important because it provides information on:
How many items to examine
Which items to select
How sample results are evaluated and extrapolated to the population in order to tell us something about the population (e.g. level of misstatement)
Sampling risk: the probability that the auditor has reached an incorrect conclusion because audit sampling was used rather than 100% examination (i.e. correctly chosen sample was not representative of the population).
Non-sampling risk: arises from factors, other than sample size, that cause an auditor to reach an incorrect conclusion, such as the possiblility that:
The auditor will fail to recognise misstatements included in examined items
The auditor will therefore apply a procedure that is not effective in achieving a specific objective.
Characteristic of interest
- When sampling, the auditor identifies a particular characteristic of the population to focus upon.
- For tests of control, the characteristic of interest is the rate of deviation from an internal control policy or procedure.
- For substantive tests, the characteristic of interest is monetary misstatement in the balance.