Page 138 - CA Inter Audit PARAM

CA Ravi Taori
Answer ➢ Audit sampling enables the auditor to obtain and evaluate audit evidence about some characteristic
of the items selected in order to form or assist in forming a conclusion concerning the population
from which the sample is drawn.

➢ The approaches to sampling are:
• Statistical sampling; and
• Non-statistical sampling.

• Statistical sampling – An approach to sampling that has the following characteristics:
o Random selection of the sample items; and
o The use of probability theory to evaluate sample results, including measurement
of sampling risk.

• Non-statistical sampling
A sampling approach that does not have characteristics (i) and (ii) is considered non-
statistical sampling.

➢ Representative
Whatever may be the approach non-statistical or statistical sampling, the sample must be
representative. This means that it must be closely similar to the whole population although not
necessarily exactly the same.

➢ Not Sample Size But Way of Selection
The decision whether to use a statistical or non-statistical sampling approach is a matter for the
auditor’s judgment; however, sample size is not a valid criterion to distinguish between statistical
and non-statistical approaches, it is the way we select sample which differentiates 2 approaches. The
sample must be large enough to provide statistically meaningful results.

QNO-- Statistical Sampling Short Note New Course – (S24E)
530.08 Bhaskar CNO – SA530.180

You are the statutory auditor of NP Ltd. Looking at the huge size of similar transactions, you directed your
team members to use statistical sampling. One of the team members, Mr. Q, wants to select samples based

upon his personal experience & knowledge as he is not aware of statistical sampling. You are required to
explain to Mr. Q why the use of statistical sampling method is more scientific and appropriate.
Answer Statistical sampling: Statistical sampling is an approach to sampling that has the random selection of the
sample units and the use of probability theory to evaluate sample results, including measurement of sampling
risk characteristics.

Statistical Sampling is more scientific and appropriate as:

• Audit testing done through this approach is more scientific than testing based entirely on the auditor’s
own judgment because it involves use of mathematical laws of probability in determining the appropriate
sample size in varying circumstances.

• Statistical sampling has reasonably wide application where a population to be tested consists of a large
number of similar items and more in the case of transactions involving compliance testing, trade
receivables’ confirmation, payroll checking, vouching of invoices and petty cash vouchers.

• There is no personal bias of the auditor in case of statistical sampling. Since it is scientific, the results of
samples can be evaluated and projected on the whole population in a more reliable manner.

In larger organisation, with huge transactions, statistical sampling is always recommended as it is unbiased,
and the samples selected are not prejudged.

QNO Advantages of Statistical Sampling Old Course -- (P16M/N17M/M19E/N20M/N20E/
SM17
530.09 Bhaskar CNO- SA530.160 /SM20/SM21/N21M/M22M/M22R)
Advantages of Statistical sampling in Auditing.
OR

What are the advantages of Statistical sampling technique in auditing?
OR

www.auditguru.in 4.37