Audit sampling involves testing less than 100 percent of a population and then utilizing the results to draw a conclusion about the entire population. This process saves the time, effort, and expense that may be involved in comprehensive testing. Audit sampling is most effective for populations in which a large number of similar transactions are processed in a similar manner. For example, audit sampling is typically appropriate for testing accounts payable, because a large number of invoices pass through this system and, usually, they are all subjected to the same procedures. “Sampling accounts payable data should produce results that are representative of those yielded by an examination of the entire accounts payable population” (Wilburn, 1984). However, for those situations in which a small number of transactions are involved, or in which the items are not processed in a similar manner, sampling is not a suitable approach.
The appropriateness of audit sampling in a given testing situation is also largely dependent on the significance of the population. If the whole population is not significant that is, if the population is not of consequence then sampling, indeed any method of examination, would prove unrevealing. In addition, if a small number of transactions comprise the entire population and each is individually significant, all items should be examined rather than taking a sample.
When used appropriately, audit sampling can add significant value to the audit testing process. Internal auditors typically perform multiple tests during an audit assignment to increase their understanding of the area under review. For some of those tests, the auditor may choose to examine a limited number of transactions, rather than the entire population. Known as sampling, this method often represents an integral part of the audit testing process.
Consequently, it is important for internal auditors to understand how the method......
