Non-Statistical Sampling

Non-Statistical Sampling Defined

Non-statistical sampling, also known as judgmental sampling, is a sampling method where the selection of items is based on the auditor’s professional judgment rather than employing random selection methods. This approach allows auditors to focus on transactions or items that are perceived to be of higher risk or more significant in nature, without the constraints of statistical randomness.

Key Features

1. Subjective Selection: Samples are chosen based on criteria set by the auditor, which may include perceived risk, materiality, or other relevant factors.
2. Assessor Expertise: Relies on the experience and expertise of the auditor to identify areas of interest or concern.
3. Non-Random: Unlike statistical sampling, it does not require the randomness of sample selection; therefore, it does not allow for statistical inferences about the entire population.
4. Flexibility: Provides flexibility in selection, often used when time or cost constraints do not allow for more rigorous sampling techniques.

Examples

1. High-Value Transactions: An auditor may choose to examine all transactions above a certain value threshold, believing these to be more indicative of potential issues.
2. Specific Vendors or Customers: Focusing on transactions with specific entities that have a history of errors or fraud.
3. Critical Periods: Reviewing transactions recorded in peak periods of business activity to assess accuracy and completeness.

Frequently Asked Questions

Q1: What is the main advantage of non-statistical sampling? A1: The main advantage is the auditor’s ability to apply judgment and focus on areas they believe to be of higher risk or importance, providing a more efficient audit process.

Q2: Can non-statistical sampling be used for regulatory compliance audits? A2: Yes, non-statistical sampling can be used where regulatory guidelines permit judgmental approaches, though the auditor must document their rationale and conclusion comprehensively.

Q3: Does non-statistical sampling provide statistically valid results? A3: No, since the sample is not selected randomly, the results cannot be extrapolated to the entire population with the same confidence as statistical sampling.

Related Terms

• Judgmental Sampling: Another name for non-statistical sampling, emphasizing the use of the auditor’s judgment in selecting samples.
• Statistical Sampling: A method where sample selection is based on random techniques, allowing the results to be extrapolated to the entire population.
• Materiality: The significance of an amount, transaction, or discrepancy that could affect the decision-making of users of the financial statements.
• Audit Risk: The risk that the auditor may unknowingly fail to appropriately modify their opinion on financial statements that are materially misstated.

Online References

1. American Institute of CPAs (AICPA)
2. International Auditing and Assurance Standards Board (IAASB)
3. The Institute of Internal Auditors (IIA)

Suggested Books for Further Studies

1. “Auditing and Assurance Services” by Alvin A. Arens, Randal J. Elder, Mark S. Beasley
2. “Audit Sampling: An Introduction” by Dan M. Guy, Douglas F. Carmichael
3. “Auditing: A Risk-Based Approach to Conducting a Quality Audit” by Karla Johnstone, Audrey Gramling, Larry E. Rittenberg

Accounting Basics: “Non-Statistical Sampling” Fundamentals Quiz

Thank you for delving into the world of non-statistical sampling. Sharpen your auditing practices with this blend of fundamental knowledge and practical application. Keep striving for excellence in your audit and financial endeavors!