Non Statistical Sampling is a method used in auditing where auditors select samples based on their judgment rather than statistical techniques. It gets to be a useful and practical approach, mainly where this might require auditors to hone in on some areas of interest. With non statistical sampling, we do not use maths or random selection. It’s a common approach to audits that don’t require high specificity, where professional judgment is important. This article aims to discuss audit sampling, statistical sampling, non statistical sampling, methods, uses, and issues related to sampling.
What is Audit Sampling?
Audit sampling is an auditor technique that tests a portion of information from a given population. Rather than testing every record or transaction, auditors use samples to reach conclusions regarding the entire population. It saves time and energy but is still a valid result.
The two primary types of audit sampling are explained below: statistical sampling and non statistical sampling. Statistical sampling is mathematical when selecting samples and measuring risk, while non-statistical sampling is based on the judgment and experience of the auditor. The two methods also have their pros and cons and are employed according to the nature of the audit.
What is Non Statistical Sampling?
Non Statistical Sampling is a method where auditors use their professional judgment to select samples. Unlike statistical sampling, It does not involve random selection or mathematical calculations. Auditors select samples using risk, materiality, and knowledge of the client’s business.
This technique is especially helpful when the auditors are asked to pay close attention to higher-risk areas or particular transactions. For instance, suppose there is reason to believe that there may be fraud in one particular department, then an auditor could apply non statistical sampling. Although not as precise as statistical sampling, it provides flexibility and is easier to implement in most audit circumstances.
Methods of Non Statistical Sampling
Non statistical sampling techniques are applied by auditors in the following ways to reach the required samples. Those are the most common:
Haphazard Sampling
Haphazard sampling is where the auditors will randomly pick a sample without a particular pattern or even on a specific plan. While it may seem random, it is not really random because it depends on the auditor’s discretion. Although this method is easy and quick to implement, it may cause biased results if the auditor does not equilibrium their options. It’s ideal for light audits, where speed is valued over accuracy.
Block Sampling
In block sampling, a series of consecutive items from a population are collected. Auditors might check all transactions for a certain month, for example. While this is a straightforward method, it may misrepresent the overall population. It is good for targeted reviews but may overlook trends or problems outside the interrogated block. It should be used by auditors cautiously so that results are not skewed.
Judgmental Sampling
Judgmental sampling relies completely on the auditor’s expertise and knowledge. Auditors select samples they deem most relevant or risky. This is highly subjective but can be useful when used in targeted audits. It enables auditors to concentrate on higher-risk areas, but it may be void of objectivity. The, with additional methods, methods may generally improve the data reliability of the audit.
Uses of Non Statistical Sampling
Non statistical sampling in auditing is an easy way of sampling for auditors who do not use statistics. Using a risk-based approach helps increase flexibility, efficiency, and cost-effectiveness as well as a means to target higher risk areas or adjust to audit findings in real time.
- Focus on High-Risk Areas: Auditors have the ability to use discretion to focus on areas of the financial statements with a greater likelihood of error or fraud. This lets them detect problems quickly and focus on the most important ones first. In this way, auditors can target the high-risk area, provide better insights, and enhance the overall quality of the audit.
- Cost-Effective: Judgmental sampling takes less time and does not use resources as needed as statistical sampling. It provides significant outcomes whilst also saving time and resources. This makes it a favoured option for auditing with low budgets or short deadlines.
- Flexibility: Auditors can adjust the sampling process depending on the results from the audit. It lets them revise their strategy as fresh information becomes available. Flexibility keeps the audit correct and effective even if it is changed after the initial plan.
- Practicality: Master sampling is the best for practical audits that do not demand specific measurements. It is also effective in situations where decisions need to be made quickly. Hand sampling is most useful in smaller audits or when detailed statistical analysis is not warranted.
Purpose of Audit Sampling
Audit sampling enables auditors to test a subset of a population to make inferences about the whole population. It helps save time and lower costs while making sure that audits are thorough but also effective. Below are 5 key objectives of audit sampling:
- Save Time and Resources: Not the capability to review all of the data available, ledger or source system population, autodiagnosis sampling provides auditors with the capability to review a small sample from both populations. Time-saving, reduces workload, speeds up the audit process and is cost-effective.
- Detect Risks and Errors: Taking a sample allows auditors to detect possible errors, fraud, or risks in the data. It helps them to concentrate more on areas which need attention and take corrective time-outs quickly.
- Verify Correctness: Audit sampling enables verification of correct financial records or processes. It aids auditors in confirming whether the data is trustworthy and does not contain material mistakes.
- Support Decision Making: Based on the conclusion from audit sampling, auditors make data-driven decisions. All these stakeholders can recommend solutions by sample results and enhance audit quality.
- Meet Regulatory Requirements: Audit sampling helps meet regulatory requirements. It allows the auditors to show that they reviewed the data properly and also followed auditing standards.
Issues of Non Statistical Sampling
Despite the advantages of non statistical sampling, there are issues such as subjectivity, absence of accuracy, difficulty in defending and more.
- Subjectivity: Dependence on auditor judgment can introduce subjectivity and result in biased or inconsistent results. The findings can also have less reliability since they can be biased by the personal opinions of researchers on what they think they will find. This creates an impact on stakeholders’ trust and lowers the credibility of the audit.
- Absence of Accuracy: The judgment sampling does not give measurable levels of confidence or margins of error. It’s not statistically sound enough for a nuanced analysis. This makes it impossible to make strong conclusions or comparisons to outcomes over time.
- Difficulty in Defending: Auditors can have difficulty defending their sample in view of stakeholders or regulators. Without a definitive method, concerns about fairness and transparency can emerge. This fact can create difficulties during the reviews or audits by third parties.
- Limited Applicability: Judgmental sampling may not be appropriate for large audits that require statistical accuracy. It’s only good for smaller, targeted audits, not complicated, data-heavy projects. There needs to be a more structured approach to more broad audits, which is often the case.
Non Statistical Sampling FAQs
1. What is non statistical sampling?
Non statistical sampling is a technique wherein auditors utilize their judgment in choosing samples rather than using statistical methods.
2. What is the difference between statistical and non statistical sampling?
Statistical sampling involves the application of mathematical approaches in selecting the samples, whereas non statistical sampling depends on the judgment of the auditor.
3. What are the methods of non statistical sampling?
The major techniques are haphazard sampling, block sampling, and judgmental sampling.
4. When does non statistical sampling occur?
Where auditors desire flexibility, desire to concentrate in high-risk segments, or there is no requirement for exact measures.
5. What are some of the issues of non statistical sampling?
Primarily, non statistical sampling faces subjectivity, imprecision, challenges in support of sample choices, and restrictiveness in cases of large scale audits.
