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CA Ravi Taori

Sampling Risk Old Course -- (P16M/N17R/M19M/N20R/M21M/ SM17/
QNO
530.01 Bhaskar CNO- SA530.020/CNO- SA530.040 M19E/N20E/SM20/ SM21/M22R/M23R/M23E)
New Course -- (SM25)
While planning the audit of S Ltd. you want to apply sampling techniques. What are the risk factors you
should keep in mind.
OR
The auditor is faced with sampling risk in both tests of control and substantive procedures. Comment on
this statement with reference to SA 530 on Audit Sampling.
OR
"Sampling risk can lead to erroneous conclusions". Justify.
OR
Sampling risk is the risk that the auditor’s conclusion based on a sample may be different from the
conclusion if the entire population were subjected to the same audit procedure. Sampling risk leads to
erroneous conclusions. Explain in detail distinguishing it from non-sampling risk with examples.
Answer ➢ Risk Factors while applying Sampling Techniques:
Definition
• As per SA 530 “Audit Sampling”, sampling risk is the risk that the auditor’s conclusion based
on a sample may be different from the conclusion if the entire population were subjected
to the same audit procedure

• Sampling risk can lead to two types of erroneous conclusions-
• In the case of a test of controls, that controls are more effective than they actually
are, or in the case of tests of details, that a material misstatement does not exists
when in fact it does. The auditor is primarily concerned with this type of erroneous
conclusion because it affects audit effectiveness and is more likely to lead to an
inappropriate audit opinion.
• In the case of test of controls, the controls are less effective than they actually are,
or in the case of tests of details, that a material misstatement exists when in fact it
does not. This type of erroneous conclusion affects audit efficiency as it would
usually lead to additional work to establish that initial conclusions were incorrect.

• Non-Sampling Risk.
• The risk that the auditor reaches an erroneous conclusion for any reason not
related to sampling risk.
• Example: Examples of non-sampling risk include use of inappropriate audit
procedures, or misinterpretation of audit evidence and failure to recognize a
misstatement or deviation.
• Sources of Non Sampling risk are: (Human-AIM)
➢ Human Mistakes
➢ Applying audit procedures not appropriate to the objectives of audit
➢ Relying on erroneous information e.g. erroneous confirmation
➢ Misinterpreting the sample results
• Non sampling risk can never be mathematically measured.

Sample Design- Sample Size- Sampling Method- In Old Course -- (P16M/M16E/N18E/M16R/
QNO SM17/SM20/SM21/N21M/N22R/N22E)
530.03 Short Bhaskar CNO- SA530.100
New Course -- (SM25)
State the requirements relating to audit sampling, sample design, sample size and selection of items for
testing.
OR
With reference to Standard on Auditing 530, state the requirements relating to audit sampling, sample
design, sample size and selection of items for testing.
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