Statistical vs Nonstatistical Sampling

Summary

This video explores two key approaches to audit sampling: statistical and non-statistical sampling. Statistical sampling relies on probability to determine an optimal sample size, allowing for the quantification of sampling risk, while non-statistical sampling is based on the auditor's judgment, often focusing on outlier transactions. Despite the objectivity of statistical methods, non-statistical sampling is prevalent in practice due to varying levels of statistical proficiency among auditors. Ultimately, both methods carry inherent sampling risks but serve essential roles in the auditing process.

Takeaways

• 📊 Statistical sampling is based on probability, making it more objective compared to non-statistical sampling.
• 📝 Non-statistical sampling relies on the auditor's judgment rather than probabilistic methods.
• 🔍 In statistical sampling, auditors determine the optimal sample size using factors like tolerable risk.
• ⚖️ Sampling risk exists in both statistical and non-statistical sampling; it is the risk that conclusions drawn from a sample may not represent the entire population.
• 📉 Statistical sampling allows auditors to quantify sampling risk, enhancing their understanding of potential errors.
• 🔑 Non-statistical sampling may involve selecting high-value items, such as large purchase orders, based on auditor discretion.
• 💡 Auditors may choose non-statistical sampling when they lack statistical expertise or find it more practical.
• 📈 In practice, non-statistical sampling is prevalent, despite the advantages of statistical methods.
• 🔗 Both sampling methods can lead to sampling risk, but statistical sampling provides a framework for measuring it.
• 💬 Understanding the strengths and weaknesses of both sampling approaches is crucial for effective audit practices.

Q & A

What are the two general approaches to audit sampling?

The two general approaches to audit sampling are statistical sampling and non-statistical sampling.

How does statistical sampling differ from non-statistical sampling?

Statistical sampling is based on the laws of probability and is more objective, while non-statistical sampling relies on the auditor's judgment and is more subjective.

What is the role of probability in statistical sampling?

In statistical sampling, probability is used to determine the optimal and most efficient sample size from the population, considering tolerable risk.

What is sampling risk?

Sampling risk is the risk that the conclusions drawn from a sample may not represent the true characteristics of the entire population.

How is sample size determined in statistical sampling?

Sample size in statistical sampling is determined using probability calculations to ensure it is efficient and sufficient based on tolerable risk.

Can you give an example of when non-statistical sampling might be used?

An example of non-statistical sampling would be when an auditor focuses on a few large purchase orders rather than randomly selecting from the entire population.

Why might some auditors prefer non-statistical sampling?

Some auditors might prefer non-statistical sampling because not all auditors are well-versed in statistics, making it more practical for them to use their judgment.

Is sampling risk present in both statistical and non-statistical sampling?

Yes, sampling risk is present in both statistical and non-statistical sampling; it cannot be completely eliminated.

What is an example population mentioned in the transcript?

An example population mentioned in the transcript consists of 1,000 different purchase orders.

How does the example of purchase orders illustrate statistical and non-statistical sampling?

The example illustrates statistical sampling by determining sample size through probability, and non-statistical sampling by selecting large purchase orders based on auditor judgment rather than probability.