Meaning and definition of Audit Sampling
Audit sampling can be defined as the process of applying auditing procedures to under 100% of different items in an organization’s account balance in a way that every single unit might have an equal probability of being selected.
Techniques for Audit Sampling
There are certain important sampling techniques that can be adopted by an auditor. These include:
- Haphazard sampling
The haphazard sampling technique is the one adopted by the auditor in cases where the sample does not follow a structured technique. Haphazard sampling is, however, not appropriate during the use of statistical sampling. Besides, it is also important for the auditor to always ascertain that haphazard sampling is not ‘doctored’ in a way that by design avoids sampling items which, for instance, are difficult to locate. All items in the population should get a chance of being selected.
- Stratified sampling
This sampling technique involves the auditor to split items included in a sample into their different sections. For instance, in a payroll sample the auditor might divide the sample in full-time males, full-time females, part-time males, and part-time females thus working out the percentage of sections in the population.
- Systematic sampling
The systematic sampling is also referred as ‘interval’ sampling. This sampling technique involves the auditor to take the number of sampling units in the population and segregate this into the sample size so as to provide a sampling interval. In a sales invoice, for example, where the sampling interval is 25, the auditor will determine an initial point for sampling and subsequently sample every 25th sales invoice.
- Block sampling
Block sampling is a sampling technique wherein the auditor applies measures to such items which occur in the same block of sequence or time. However, the block sampling technique should be used with caution as valid references cannot possibly be made beyond the examined period or block.
This sampling technique allows the auditor to use his judgment in making selection of samples. The basic issues influencing the selection of sample are:
- value of the items
- relative risk involved
- representativeness of the sample
- Debt ratios
- Liquidity ratios
- Profitability ratios
- Asset management ratios
- Cash Flow Indicator Ratios
- Market value ratios
- Financial analysis
- Business Terms
- Financial education
- International Financial Reporting Standards (EU)
- IFRS Interpretations (EU)
- Financial software