ISA 530 Audit Sampling states that the objective of the auditor, when using audit sampling, is to provide a reasonable basis for the auditor to draw conclusions about the population from which the sample is selected.
Required:
Explain the difference between statistical sampling and non-statistical sampling and describe FOUR methods of sampling selection. (8 marks)
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Statistical sampling is any approach to sampling that involves random selection of a sample, and the use of probability theory to evaluate sample results, including measurement of sampling risk.
Non-statistical sampling is where the auditor does not use statistical methods and draws a judgemental opinion about the population.
Sample selection methods include the following:
(i) Random selection ensures that all items in the population have an equal chance of selection. It often involves selection of a sample with the use of random number tables or random number generators.
(ii) Systematic selection involves selecting items using a constant interval between sections, the first interval having a random start.
(iii) Haphazard selection may be an alternative to random selection provided auditors are satisfied that the sample is representative of the entire population. It is a selection of a sample without following any particular structured technique and requires care to guard against making a selection which is biased.
(iv) Block selection may be used to check whether certain items have particular characteristics. For example an auditor may use a sample of 50 consecutive cheques to test whether cheques are signed by authorised signatories rather than picking 50 single cheques throughout the year.