Non-sampling risk is the risk that despite having selected an appropriate sample, the auditors will arrive at wrong conclusion. If the auditor has chosen right sample and still makes the faulty conclusion due to other reasons, it is known to be a Non sampling risk. Auditors here have mistakenly used the inappropriate procedure for judging the entire sample which leads him to make the non-sampling risk.
Auditors need to give the opinion on the financials for their truthfulness and fairness. He cannot gives the opinion by applying audit procedures to the selected samples rather than on the entire population. If the sample which he has selected is not correct, the situation is said to result in sample risk while if he had picked the right sample but have not applied the correct procedure, then the situation will be referred as the non-sampling risk.
The sample which the auditors selected to judge the whole population should be reasonable. Just picking up the right sample is not enough. The auditor also have to apply a correct procedure to make a good judgment of the sample. The wrong procedure will increase the non-sampling risk which has the greatest impact on the financial statement and cause it to be a misleading presentation of the entire firm.
Non Sampling risk takes place in the following situations:
1- Inappropriate procedure: The situation where the auditor has chosen the right sample but has applied the wrong audit procedure.
2- Misinterpret the audit evidence: When the procedure auditor has applied is correct but he did not properly understand the evidence.
3- Unable to recognize misstatement: The situation where there is the misstatement present but the auditor fails to recognize it.
- Debt ratios
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- Market value ratios
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Most WantedFinancial Terms
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- Debt Service Coverage Ratio
- Accounts Payable Turnover Ratio
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