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Unit 7: Audit Sampling

Haphazard sampling: A non-probability sampling scheme in which population elements are Notes
chosen based on convenience.

Inherent risk: The probability of loss arising out of circumstances or existing in an environment,
in the absence of any action to control or modify the circumstances.

Judgment: Judgmental sampling is a non-probability sampling technique where the researcher
selects units to be sampled based on their knowledge and professional judgment.
Sampling error: Sampling error is an error that occurs when using samples to make inferences
about the populations from which they are drawn.
Sampling risk: Refers to the possibility that the sample drawn is not representative of the
population and that, as a result, the auditor will reach an incorrect conclusion about the account
balance or class of transactions based on the sample.

Sampling unit: A single section selected to research and gather statistics of the whole.
Stratified sampling: A sampling in which each element in the population has an equal chance of
being chosen for the sample.
Substantive tests: A procedure used during accounting audits to check for errors in balance
sheets and other financial documentation.

Systematic sampling: A method of sampling where units are selected from the sampling frame
by every "nth" unit.

7.8 Review Questions

1. Explain the definition and concept of Audit Sampling.
2. What is the purpose of audit sampling?

3. Explain the various techniques of audit sampling.
4. What is sampling risk?

5. What is sampling error? Discuss the various types of sampling error.
6. Explain the steps of designing a sampling application.

7. Differentiate between statistical and non-statistical sampling.
8. Explain compliance test and substantive tests.
9. How does the increasing rate of the sampling risk affect the overall efficiency of the
business? Explain with examples.

10. Write short notes on:
(a) Haphazard sampling

(b) Stratified sampling
(c) Non-sampling error
(d) Sampling risk

(e) Bias problems.

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