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Chapter 11

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

Business Administration
Course Code
BUS 426
Craig Emby

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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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