VSA 530 Audit sampling and other selective testing procedures

VIETNAMESE STANDARDS ON AUDITING

STANDARD No. 530

AUDIT SAMPLING AND OTHER SELECTIVE TESTING PROCEDURES

(Issued in pursuance of the Finance Minister’s Decision No. 143/2001/QD-BTC dated 21 December 2001)

 

GENERAL PROVISIONS 

 

1. The purpose of this Vietnamese Standard on Auditing (VSA) is to establish standards and fundamental principles and provide guidance on the selection of an audit sample and procedures other to gather audit evidence in an audit of financial statements.

 

2. When designing audit procedures, the auditor should determine appropriate means for selecting audit sample so as to gather audit evidence to meet the objective of audit testing.

 

3. This VSA applies to audits of financial statements and also applies to an audit of other financial information and related services rendered by the audit firm.

The auditor and the audit firm should comply with this VSA in conducting an audit of financial statements and other related services.

 

Following this standard, the audit firm is to prescribe policies and procedures on audit sampling and other selective procedures for use by its staff.

 

In this VSA, the following terms have the meaning attributed below:

 

4. Audit sampling (sampling) means the application of audit procedures to less than 100% of the items with in an account balance or class of transactions such that all sampling units have a chance of selection. This will enable the auditor to obtain and evaluate audit evidence about some characteristic of the items selected in order to form of assist in forming a conclusion concerning the population. Audit sampling can use either a statistical or a non-statistical approach.

 

5. Deviation means either control deviations, when performing tests of control, or misstatements, when performing substantive procedures. These deviations may be caused intentionally (fraud) or unintentionally (error) by an individual or an organization. Similarly, total deviation is used to mean either the rate of deviation or total misstatement.
6. Anomalous error means an error that arises from an isolated event that has not recurred other than on specifically identifiable occasions and is therefore not representative of errors in the population.

 

7. Population means the entire set of data from which a sample is selected and about which the auditor wishes to draw conclusions. For example, all of the items in an account balance or a class of transactions constitute a population. A population may be divided into strata, or sub-populations, with each stratum being examined separately. The term “population” is used to include the term “stratum”.

 

8. Sampling risk arises from the possibility that the auditor’s conclusion, based on a sample, may be different from the conclusion reached if the entire population were subjected to the same audit procedure. There are two types of sampling risk.
   a. the risk the auditor will conclude, in the case of a test of control, that control risk is lower than it actually is, or in the case of a substantive test, that a material error does not exist when in fact it does. This type of risk affects audit effectiveness and is more likely to lead to an inappropriate audit opinion; and
   b. the risk the auditor will conclude, in the case of a test of control, that control risk is higher than it actually is, or in the case of substantive test, that a material error exists when in fact it does not. This type of risk affects audit efficiency as it would usually lead to additional work to establish that initial conclusions were incorrect.

 

9. Non-sampling risk arises from factors that cause the auditor to reach an erroneous conclusion for any reason not related to the size of the sample. For example, the auditor might use inappropriate procedures, or the auditor might misinterpret evidence and fail to recognize an error.

 

10. Sampling unit means the individual items constituting a population, for example checks listed on deposit slips, credit entries on bank statements, sales invoices or debtor’s balances. Form of sampling unit could be either a monetary unit, quantity or a physical thing.

 

11. Statistical sampling means any approach to sampling that has the following two characteristics:
    a. random selection of a sample; and
    b. use of probability-statistical theory to evaluate sample results, including measurement of sampling risk.

“Non-statistical sampling” is a sampling approach that does not have either or both of the above characteristics.

 

12. Stratification is the division of a population into sub-populations, each of which is a group of sampling units with similar characteristics (often monetary value).

 

13. Tolerable error means the maximum error in a population that the auditor and audit firm are willing to accept. Tolerable error is normally immaterial.

 

CONTENT OF THE VSA

 

Audit Evidence

 

14. In accordance with VSA 500 “Audit Evidence”, audit evidence is obtained from an appropriate mix of tests of control and substantive procedures.

 

Tests of Control

 

15. In accordance with VSA 400 “Risk Assessments and Internal Control” tests of control are performed if the auditor plans to assess control risk less than high for a particular assertion.

 

16. Based on the auditor’s understanding of the accounting and internal control systems, the auditor identifies the characteristics or attributes that indicate performance of a control, as well as possible deviation conditions which indicate departures from adequate performance. The presence or absence of attributes can then be tested by the auditor.

 

17. Audit sampling for tests of control is generally appropriate when application of the control leaves evidence of performance (for example, initials of the credit manager on a sales invoice indicating credit approval, or evidence of authorization of data input to a micro-computer based data processing system).

 

Substantive Procedures

 

18. Substantive procedures are of two types: analytical procedures and tests of details of transactions and balances. Substantive procedures are only relevant to monetary value. The purpose of substantive procedures is to obtain audit evidence to detect material misstatements in the financial statements. When performing substantive tests of details, audit sampling and other means may be used to verify one or more assertions about a financial statement amount (for example, the existence of accounts receivable), or to make an independent estimate of some amount (for example, the value of obsolete inventories).

 

Risk Considerations in Obtaining Evidence

 

19. In obtaining evidence, the auditor should use professional judgment to assess audit risk and design audit procedures to ensure this risk is reduced to an acceptably low level.

 

20. Audit risk: means the risk that the auditor and the audit firm give an inappropriate audit opinion when the financial statements are materially misstated. Audit risk has three components: inherent risk, control risk and detection risk.

 

Inherent risk is the susceptibility of an account balance or class of transactions to misstatement that could be material individually or when aggregated with misstatements in other balances or classes, assuming that there were no related internal controls.

 

Control risk is the risk that a misstatement that could occur in an account balance or class of transactions and that could be material individually or when aggregated with misstatement in other balances or classes will not be prevented or detected and corrected on a timely basis by the accounting and internal control systems.

 

Detection risk is the risk that misstatement exists in an account balance or class of transactions that could be material individually or when aggregated with misstatements in other balances or classes that the auditor and the audit firm fail to detect.

 

These three components of audit risk are considered during the planning process in the design of audit procedures in order to reduce audit risk to an accept ably low level.

 

21. Sampling risk and non-sampling risk can affect the components of audit risk. For example, when performing tests of control, the auditor may find no errors in a sample and conclude that control risk is low, when the rate of error in the population is, in fact, unacceptably high (sampling risk). Or there may be errors in the sample which the auditor fails to recognize (non-sampling risk). With respect to substantive procedures, the auditor may use a variety of methods to reduce detection risk to an acceptable level. Depending on their nature, these methods will be subject to sampling and/or non-sampling risks. For example, the auditor may choose an inappropriate analytical procedure (non-sampling risk) or may find only minor misstatements in a test of details when, in fact, the population misstatement is greater than the tolerable amount (sampling risk). For both tests of control and substantive tests, sampling risk can be reduced by increasing sample size, while non-sampling risk can be reduced by proper engagement planning, supervision, and review.

 

Procedures for Obtaining Evidence

 

22. Procedures for obtaining audit evidence include inspection, observation, inquiry and confirmation, computation and analytical procedures. The choice of appropriate procedures is a matter of professional judgment in the circumstances. Application of these procedures will often involve the selection of items for testing from a population.

 

Selecting Items for Testing to Gather Audit Evidence

 

23. When designing audit procedures, the auditor should determine appropriate means of selecting items for testing. The means available to the auditor are:
    a. Selecting all items (100% examination);
    b. Selecting specific items, and
    c. Audit sampling.

 

24. The application of any one or combination of the above means may be appropriate in particular circumstances. The decision as to which approach to use will depend on assessment of audit risk and the effectiveness of an audit. The auditor needs to be satisfied that methods used are effective in providing sufficient appropriate audit evidence to meet the objectives of the test.

 

Selecting All Items (100% examination)

 

25. The auditor may decide that it will be most a appropriate to examine the entire population of items that make up an account balance or class of transactions (or a stratum within that population). Selecting all items is unlikely in the case of tests of control; however, it is more common for substantive procedures. For example, 100% examination may be appropriate when:

• the population constitutes a small number of large value items;
• both inherent and control risks are high and other means do not provide sufficient appropriate audit evidence;
• the repetitive nature of a calculation or other process performed by a computer information system makes selecting all items cost effective;
• there is probable indication of dispute or law suit;
• the client requires.

 

Select Specific Items

 

26. The auditor may decide to select specific items from a population based on such factors as knowledge of the client’s business, preliminary assessments of inherent and control risks, and the characteristics of the population being tested. The judgmental selection of specific items is subject to non-sampling risk. Specific items selected may include:

• High value or key items. The auditor may decide to select specific items within a population because they are of high value, or exhibit some other characteristic, for example items that are suspicious, unusual, particularly risk-prone or that have a history of error.
• All items over a certain amount. The auditor may decide to examine items whose values exceed a certain amount so as to verify a large proportion of the total amount of an account balance or class of transactions.
• Items to obtain information. The auditor may examine items to obtain information about matters such as the client’s business, the nature of transactions, accounting and internal control systems.
• Items to test procedures. The auditor may use judgment to select and examine specific items to determine whether or not a particular control procedure is being performed.

 

27. While selective examination of specific items from an account balance or class of transactions will often be an efficient means of gathering audit evidence, it does not constitute audit sampling. The results of procedures applied to items selected in this way cannot be projected to the entire population. The auditor considers the need to obtain appropriate evidence regarding the remainder of the population when that remainder is material.

 

Audit Sampling

 

28. The auditor may decide to apply audit sampling to an account balance or class of transactions. Audit sampling can be applied using either non-statistical or statistical sampling methods. Audit sampling is discussed in detail in paragraphs 29 through 56.

 

Statistical Versus Non-Statistical Sampling Approaches

 

29. The decision whether to use a statistical or non-statistical sampling approach is a matter for the auditor’s judgment regarding the most efficient manner to obtain sufficient appropriate audit evidence in the particular circumstances. For example, in the case of tests of control the auditor’s analysis of the nature and cause of errors will often be more important than the statistical analysis of the mere frequency of errors. In such a situation, non-statistical sampling may be most appropriate.

 

30. When applying statistical sampling, the sample size can be determined using either probability theory or professional judgment. Moreover, sample size is not a valid criterion to distinguish between statistical and non-statistical approaches. Sample size is a function of factors such as those identified in Appendices 1 and 2. When circumstances are similar, the effect on sample size of factors will be similar regardless of whether a statistical or non-statistical approach is chosen. (see Appendices 01 and 02).

 

31. When applying non-statistical sampling, the auditor can still use elements of a statistical approach, for example the use of random selection using computer generated random numbers. However, only when the approach adopted has the characteristics of statistical sampling statistical measurements of sampling risk are valid.

 

Design of the Sample

 

32. When designing an audit sample, the auditor should consider the objectives of the test and the attributes of the population from which the sample will be drawn.

 

33. The auditor first considers the specific objectives to be achieved and the combination of audit procedures which is likely to best achieve those objectives. Consideration of the nature of the audit evidence sought and possible error conditions or other characteristics relating to that audit evidence will assist the auditor in defining what constitutes an error and what population to use for sampling.
34. The auditor considers what conditions constitute an error by reference to the objectives of the test. A clear understanding of what constitutes an error is important for projecting and arriving at a conclusion of errors. For example, (1) in a substantive procedure relating to the existence of accounts receivable, if payments are made by the customer before the confirmation date but received shortly after that date by the client the case is not considered an error. (2) A misposting between customer accounts that does not affect the total accounts receivable balance is an error, but should not be seen as material.

 

35. When performing tests of control, the auditor generally makes a preliminary assessment of the rate of error the auditor expects to find in the population to be tested and the level of control risk. This assessment is based on the auditor’s prior knowledge or the examination of a small number of items from the population. Similarly, for substantive tests, the auditor generally makes a preliminary assessment of the amount of error in the population. These preliminary assessments are useful for designing an audit sample and in determining sample size. For example, if the expected rate of error is unacceptably high, selecting all items

 

Population

 

36. It is important for the auditor to ensure that the population should be appropriate and complete:
    a. Appropriate: population should be appropriate to the objective of the sampling procedure. For example, if the auditor’s objective is to test for overstatement of accounts payable listing. On the other hand, when testing for understatement of accounts payable, the population is not the accounts payable listing but rather subsequent disbursements, unpaid invoices, suppliers’ statements, unmatched receiving reports or other populations that provide audit evidence of understatement of accounts payable; and
    b. Complete: population should be complete. For example, if the auditor intends to select payment vouchers from a file, the auditor should be satisfied that all vouches have in fact been filed. Similarly, if the auditor intends to use sample to draw conclusions about the operation of an accounting and internal control system during the financial reporting period, the population needs to include all relevant items from the entire period. A different approach may be to stratify the population and use sampling only to draw conclusions about the control during a certain period of time, (for example, the first 9 months of a year), and to use alternative procedures or a separate sample regarding the remaining time (three months). In this case, the population does not need to be complete.

 

Stratification

 

37. Audit efficiency may be improved if the auditor stratifies a population by dividing it into discrete sub-populations of similar characteristics. The objective of stratification is to reduce the variability of items within each stratum and therefore allow sample size to be reduced without a proportional increase in sampling risk. Sub-populations need to be carefully defined such that any sampling unit can only belong to one stratum.

 

38. When performing substantive procedures, an account balance or class of transactions is often stratified by monetary value. This allows greater audit effort to be directed to the larger value items which may contain the greater potential monetary error in terms of overstatement. Similarly, a population may be stratified according to a particular characteristic that indicates a higher risk of error, for example, when testing the valuation of accounts receivable, balances may be stratified by age.

 

39. The results of procedures applied to a sample of items within a stratum can only be projected to the items that make up that stratum. To draw a conclusion on the entire population, the auditor will need to consider risk and materiality in relation to whatever other strata that make up the entire population. For example, 20% of the items in a population may make up 90% of the value of an account balance. The auditor may decide to examine a sample of these items. The auditor evaluates the results of this sample and reaches a conclusion on the 90% of value separately from the remaining 10%. On this remaining, a further sample or other means of gathering evidence will be used, or which may be considered immaterial.

 

Value weighted selection

 

40. It will often be efficient in substantive testing, particularly when testing for overstatements Under this method, the sampling unit is identified as an individual monetary value (e.g.VND 10 million) of the units that make up an account balance or class of transactions. Having selected specific monetary units from within the population, the auditor then examines the particular items that contain those are equal or higher the monetary units. This approach to defining the sampling unit ensures that audit effort is directed to the larger value items and can result in smaller sample sizes. This approach is ordinarily used in conjunction with the systematic method of sample selection (see Appendix 03) and is most efficient when selecting from computerized database.

 

Sample Size

 

41. In determining the sample size, the auditor should consider whether sampling risk is reduced to an acceptably low level. Sample size is affected by the level of sampling risk that the auditor is willing to accept. The lower the risk the auditor is willing to accept, the greater the sample size will need to be.

 

42. The sample size can be determined by the application of a statistically-based formula or through the exercise of professional judgment objectively applied to the circumstances. Appendices 01 and 02 indicated the influences that various factors typically have on the determination of sample sized in tests of control and substantive procedures.

 

Selecting the Sample Items

 

43. The auditor should select items for the sample with the expectation that all sampling units in the population have a chance of selection. Statistical sampling requires that sample items are selected at random so that each sampling unit has a known chance of being selected. The sampling units might be physical items (such as invoices) or monetary units. With non-statistical sampling, an auditor uses professional judgment to select the items for a sample. Because the purpose of sampling is to draw conclusions about the entire population, the auditor endeavors to select a representative sample by choosing sample items which have characteristics typical of the population, and the sample needs to be selected so that bias is avoided.

 

44. The principal methods of selecting samples are the use of random number tables or computer programs, systematic selection and haphazard selection. Each of these methods is discussed in Appendix 03.

 

Performing the Audit Procedure

 

45. The auditor should perform audit procedures appropriate to the particular test objective on each item selected.

 

46. If a selected item is not appropriate for the application of the procedure, the procedure is ordinarily performed on a replacement item. For example, a voided check may be selected when testing for evidence of payment authorization. If the auditor is satisfied that the check had been properly voided such that it does not constitute an error, an appropriately chosen replacement is examined.

 

47. When the auditor is unable to apply the planned audit procedures to a selected item because, for instance, documentation relating to that item has been lost and suitable alternative procedures cannot be performed on that item, the auditor ordinarily considers that item to be error.

 

Nature and Cause of Errors

 

48. The auditor should consider the sample results, the nature and cause of any errors identified, and their possible effect on the particular test objective and on other areas of the audit.

 

49. In analyzing the errors discovered, the auditor may observe that many have a common feature, for example, as to transactions, locations, products or period of time. In such circumstances, the auditor may decide to identify all items in the population that possess the common feature, and extend audit procedures in that stratum. Such errors may be intentional, and may indicate the possibility of fraud.

 

 

50. Sometimes, the auditor may be able to establish that an error arises from an isolated event that has not recurred other than on specifically identifiable occasions and is therefore not representative of similar errors in the population (an anomalous error). For error to be considered an anomalous error, not representative of the population, the auditor should perform additional work. The additional work depends on the situation, but is adequate to provide the auditor with sufficient appropriate evidence that the error does not affect the remaining part of the population. (1) One example is an error caused by a computer breakdown that is known to have occurred on only one day during the period. In that case, the auditor assesses the effect of the breakdown, for example by examining specific transactions processed on that day, and considers the effect of the cause of the break-down on audit procedures and conclusions. (2) Another example is an error that is found to be caused by use of an error that is found to be caused by use of an incorrect formula in calculating all inventory values at one particular branch. To establish that this is an anomalous error, the auditor needs to ensure the correct formula has been used at other branches.

 

Projecting Errors

 

51. When performing substantive procedures, the auditor should project monetary errors found in the sample to the population, and should consider the effect of the projected error on the particular test objective and on other areas of the audit. The auditor projects the total error for the population to obtain a broad view of the scale of errors, and to compare this to the tolerable error. For substantive procedures, tolerable error is the tolerable misstatement, and will be an amount less than or equal to the auditor’s preliminary estimate of materiality used for the individual account balances being audited.

 

52. When an error has been established as an anomalous error, it may be excluded when projecting sample errors to the population. The effect of any such error, if uncorrected, still needs to be considered in addition to the projection of the non-anomalous errors. If an account balance or class of transactions has been divided into strata, the error is projected for each stratum separately. Projected errors plus anomalous errors for each stratum are then combined when considering the possible effect of errors on the total account balance or class of transactions.

 

53. For tests of control, no explicit projection of errors is necessary since the sample error rate is also the projected rate of error for the population as a whole.

 

Evaluating the Sample Results

 

54. The auditor should evaluate the sample results to confirm the population’s appropriateness and completeness or to decide whether to revise the preliminary assessment thereof. In the case of a test of control, an unexpectedly high sample error rate may lead to an increase in the assessed level of control risk, unless further evidence substantiating the initial assessment is obtained. In the case of a substantive procedure, an unexpectedly high error amount in a sample may cause the auditor to believe that an account balance or class of transactions is materially misstated, in the absence of further evidence that no material misstatement exists.

 

55. If the total amount of projected error plus (+) anomalous error is less than but close to that which the auditor deems tolerable, the auditor considers the persuasiveness of the sample results in the light of other audit procedures, and may consider it appropriate to obtain additional audit evidence. The total of projected error plus (+) anomalous error is the auditor’s best estimate of error in the population. However, sampling results are affected by sampling risk. Thus when the best estimate of error plus (+) anomalous error is close to the tolerable error, the auditor recognizes the risk that a different sample would result in a different best estimate that could exceed the tolerable error. Considering the results of other audit procedures helps the auditor to assess this risk, while the risk is reduced if additional audit evidence is obtained.

 

56. If the evaluation of sample results indicates that the preliminary assessment of the relevant characteristic of the population needs to be revised, the auditor may:
    a. request the client’s management to investigate identified errors and the potential for further errors, and to make any necessary adjustments;
    b. modify planned audit procedures. For example, in the case of a test of control, the auditor might extend the sample size, test an alternative control or modify related substantive procedures;
    c. consider the effect on the audit report.

 

APPENDIX 1:

Examples of Factors Influencing Sample Size for Tests of Control

 

The following are factors that the auditor considers when determining the sample size for a test of control. These factors need to be considered together and should never be separated:

 

FACTOR	EFFECT ON SAMPLE SIZE
1. An increase in the auditor’s intended reliance on accounting and internal control systems	Increase
2. An increase in the rate of deviation from the prescribed control procedure that the auditor is willing to accept	Decrease
3. An increase in the rate of deviation from the prescribed control procedure that the auditor expects to find in the population	Increase
4. A decrease in the risk that the auditor will conclude that the control risk is lower than the actual control risk.	Increase
5. An increase in the number of sampling units in the population	Negligible effect

 

1. The auditor’s intended reliance on accounting and internal control systems: The more assurance the auditor intends to obtain from accounting and internal control systems, the lower the auditor’s assessment of control risk will be, and the large the sample size will need to be. For example, a preliminary assessment of control risk as low indicates that the auditor plans to place considerable reliance on the effective operation of particular internal controls. Te auditor therefore needs to gather more audit evidence to support this assessment than would be the case if control risk were assessed at a higher level.
2. The rate of deviation from the prescribed control procedure the auditor is willing to accept (tolerable error):

The lower the rate of deviation that the auditor is willing to accept, the larger the sample size needs to be.

3. The rate of deviation from the prescribed control procedure the auditor expects to find in the population: The higher the rate of deviation that the auditor expects, the larger the sample size needs to be. Factors relevant to the auditor’s consideration of the expected error rate include the auditor’s understanding of the business (in particular, procedures undertaken to obtain an understanding of the accounting and internal control systems), changes in personnel or in the accounting and internal control systems, the results of audit procedures applied in prior periods and the results of other audit procedures applied for the current period. High expected error rates ordinarily warrant little, if any, reduction of control risk, and therefore in such circumstances tests of controls would ordinarily be omitted.
4. The auditor’s conclusion of control risk as lower than it is: The greater the degree of confidence that the auditor requires that the results of the sample are in fact indicative of the actual incidence of error in the population, the larger the sample size needs to be.
5. The number of sampling units in the population. For large populations, the actual size of the population has little, if any, effect on sample size. For small populations however, audit sampling is often not as efficient as alternative means of obtaining sufficient appropriate audit evidence.

 

 

APPENDIX 2

Examples of Factors Influencing Sample Size for Substantive Procedures

 

The following are factors that the auditor considers when determining the sample size for a substantive procedure.

 

FACTOR	EFFECT ON SAMPLE SIZE
1. An increase in the auditor’s assessment of inherent risk	Increase
2. An increase in the auditor’s assessment of control risk	Increase
3. An increase in the use of other substantive procedures directed at the same financial statement assertion	Decrease
4. The risk that the auditor will conclude that a material error does not exist, when in fact it does exist.	Increase
5. An increase in the total error that the auditor is willing to accept (tolerable error)	Decrease
6. An increase in the amount of error the auditor expects to find in the population	Increase
7. Stratification of the population when appropriate	Decrease
8. The number of sampling units in the population	Negligible Effect

 

 

1. The auditor’s assessment of inherent risk: The higher the auditor’s assessment of inherent risk, the larger the sample size needs to be. Higher inherent risk implies that a lower detection risk is needed to reduce the audit risk to an acceptable low level, thus increasing sample size.
2. The auditor’s assessment of control risk. The higher the auditor’s assessment of control risk, the larger the sample size needs to be. For example, an assessment of control risk as high indicates that auditor cannot place much reliance on the effective operation of internal controls with respect to the particular financial statement assertion. Therefore, in order to reduce audit risk to an acceptably low level, the auditor needs a low detection risk and will rely more on substantive tests. The more reliance that is placed on substantive tests, the larger the sample size will need to be.
3. The use of other substantive procedures directed at the same financial statement assertion. The more the auditor is relying on other substantive procedures (test of detail or analytical procedures) to reduce detection risk to an acceptable level, the less assurance the auditor will require from sampling and, therefore, the smaller the sample size can be.
4. The auditor’s conclusion that a material error does not exist when in fact it does exist: The greater the degree of confidence that the auditor requires that the results of the sample are in fact indicative of the actual amount of error in the population, the larger the sample size needs to be.
5. The total error the auditor is willing to accept (tolerable error). The lower the total error that the auditor is willing to accept, the larger the sample size needs to be.
6. The amount of error the auditor expects to find in the population: The greater the amount of error the auditor expects to find in the population, the larger the sample size needs to be in order to make a reasonable estimate of the actual amount of error in the population. Factors relevant to the auditor’s consideration of the expected error amount include the extent to which item values are determined subjectively, the results of tests of control, the results of audit procedures applied in prior periods, and the results of other substantive procedures applied in the current period.
7. Stratification when there is a wide range in the monetary size of items in the population: It may be useful to group items of similar size into separate sub-populations or strata. When a population can be appropriately stratified, the aggregate of the sample sizes from the strata generally will be less than the sample size applied to the whole population notwithstanding sampling risk being unchanged.
8. The number of sampling units in the population. For large populations, the actual size of the population has little, if any, effect on sample size. Thus, for small populations, audit sampling is often not as efficient as alternative means of obtaining sufficient appropriate audit evidence.

 

 

APPENDIX 3

Sample Selection Methods

The principal methods of selecting samples are:

 

1. Use of a computerized random number generator or random number tables.
2. Systematic selection, in which the number of sampling units in the population is divided by the sample size to give a sampling interval (for example for a population of 10,000 and the necessary sampling size of 200, the intervals would be 50). Having determined a starting point within the first 50, each 50^th sampling unit thereafter is selected. Given that the starting point is 23, the items selected would be 23, 73, 123 and so forth. When using systematic selection, the auditor would need to determine that sampling units within the population are not structured in such a way that the sampling interval corresponds with a particular pattern in the population.
3. Haphazard selection, in which the auditor selects the sample without following a structured technique and would nonetheless avoid any conscious bias or predictability (for example avoiding difficult to locate items, or always choosing or avoiding the first or last entries on a page) and thus attempt to ensure that all items in the population have a chance of selection. Haphazard selection is not appropriate when using statistical sampling.

Block selection involves selecting a block (s) of contiguous items from within the population. Block selection cannot ordinarily be used in audit sampling because most populations are structured such that items in a sequence can be expected to have similar characteristics in the population. Although in some circumstances it may be an appropriate audit procedure to examine a block of items, it would rarely be an appropriate sample selection technique when the auditor intends to draw valid inferences about the entire population based on the sample./.

 

 

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