# BUS 426 Chapter Notes - Chapter 11: Non-Sampling Error, Simple Random Sample, Audit Risk

by Regina Ip

School

Simon Fraser UniversityDepartment

Business AdministrationCourse Code

BUS 426Professor

Craig EmbyChapter

11This

**preview**shows page 1. to view the full**4 pages of the document.**Chapter 11

Audit Sampling Concepts

The Nature of Sampling

- Selective examination of data used when

o Less than 100% of the items in the population under examination are being audited

o Each item (sampling unit) in the population could be selected as part of the sample

- The risks of an incorrect conclusion due to a sampling error or nonsampling error are called sampling

risk and nonsampling risk

o Sampling risk – the risk that the auditor reaches an inappropriate conclusion because the sample

is not representative of the population

Ways to control sampling risk

Adjust sample size

Use an appropriate method of selecting sample items in the population

o Nonsampling risk – the auditor makes an incorrect conclusion due to the failure to recognize

exceptions, and/or inappropriate or ineffective audit procedures

Statistical versus Nonstatistical Sampling

- Audit sampling methods can be divided into two categories

o Statistical sampling

Applies mathematical rules, so that auditors can measure sampling risk in phase 1 and 3

o Nonstatistical sampling

Auditors use their professional judgement to select sample items that will provide the

most useful information and reach their conclusions on the populations

- Both involve three phases

1. Planning – plan the sample and determine sample size

2. Performance – select the sample and perform the tests

3. Evaluation – evaluate the results and conclude the acceptability of the population tested

Probabilistic versus Nonprobabilistic Sample Selection

- Both sample selection fall under phase 2 (performance)

- Probabilistic sample selection

o The auditor randomly selects items such that each population item has a known probability of

being included in the sample

o Must be used for statistical sampling

- Nonprobabilistic sample selection

o The auditor selects sample items from the population using professional judgement

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