Introduction to Audit Sampling
When the audit firms in Johor Bahru are performing audits, an approach that may involve in the audit process (Also see Essential Processes in the Audit of Financial Statements) is audit sampling. Audit sampling refers to the application of audit procedures which does not reach 100% of the whole population. In the population, all the items stand an equal chance of being chosen. This is to make sure that the selected items can represent the whole population so that the auditors can express audit opinion and make their conclusions according to the audit objectives that they have determined before they start performing the audit procedures (Also see Audit Procedures That Helps in Detecting Fraud).
Audit sampling is vital as apart from helping the auditors to collect sufficient and appropriate audit evidence so that they may issue audit opinion; it will also help in boosting the effectiveness and efficiency of audit works. This means that the auditors do not need to examine all the items or objects before expressing their opinion.
The methods and process of selection should not be influenced by the bias from the auditors as well as the human judgements so that the chosen items represent the entire population. Auditors should only perform verification and review on the selected items before expressing their opinions on the total population.
Objectives of Audit Sampling
Audit sampling plays a crucial role in audit works. Regardless of the types of audit, the auditors still need to implement this technique. Also, audit sampling is part of the requirements of the audit standard, and it helps the auditors to achieve their purpose with less effort.
Listed below are some objectives of audit sampling:
- To collect audit evidence so that the auditors may issue audit opinion.
- To reduce the audit work, yet the auditors can still make their conclusions.
- To detect and fraud or error that may occur in the financial statements or the company.
- To prove that the auditors have completed their jobs according to the auditing standards.
- Acts as a tool for investigations (Also see Reasonableness Test as a tool).
Types of Audit Sampling
Generally, auditors can perform audit sampling in two distinct ways, which are statistical sampling and non-statistical sampling.
Statistical Audit Sampling
Statistical audit sampling means that the auditors would use a random sampling technique to choose the items from the entire population by using probabilities to measure the testing result and make the conclusion.
Statistical audit sampling plays a significant role in helping the auditors in managing and controlling audit risks. This is because by implementing this, the auditors will use probabilities and data to choose the items from the entire population. They do not prejudge the data, and they are not biased to the information.
Auditors will usually perform statistical audit sampling when there are more than one hundred items in the entire population. The auditors may access to various tools that they may utilise when performing audit sampling. If they do not have the tool, instead of using software, they may use that function in Microsoft Excel.
Non-statistical Audit Sampling
According to the theory ISA has established, a non-statistical method is any approach which does not meet the criteria of the statistical method. This indicates that you need to have a thorough understanding of statistical audit sampling. To determine if the sampling is systematic, the auditors may identify whether the sampling fulfils the following statements.
Firstly, they need to determine whether the selection of items or data is random. If it is not, the sampling is non-statistical as the auditors choose them based on their judgement.
Secondly, if the auditors do not use the testing result from the selection to conclude the nature of the whole population, the sampling is non-statistical too.
The auditors may not implement statistical audit sampling to choose the items for their testing. Rather, they may select the items according to:
- Values of the items, for instance, the items with the top five highest value
- Items which has a value which is higher than a particular amount, for instance, items with a value more than their level of materiality.
- Items that possess data or information the auditors want to examine, for instance, any transaction for the purchase from a certain supplier.