Non-Statistical Sampling

Definition

Non-statistical sampling is an audit sampling method that relies on the auditor's judgment rather than mathematical probability to select items for testing. This approach allows auditors to use their expertise and understanding of the client's business to identify specific transactions or account balances that may pose a higher risk of material misstatement. While it can be effective, this method does not provide a statistical basis for projecting results or quantifying the level of assurance obtained from the sample.

5 Must Know Facts For Your Next Test

1. Non-statistical sampling does not require the use of random selection methods, making it more flexible but potentially less reliable than statistical methods.
2. This approach can be particularly useful in situations where the population is small or when specific items are known to have issues based on past experience.
3. Auditors must document their rationale for selecting specific items in non-statistical sampling to provide transparency and support their conclusions.
4. One key limitation of non-statistical sampling is that it cannot be used to mathematically project misstatements to the entire population, which could lead to underestimating risks.
5. In non-statistical sampling, auditors often combine this method with other techniques, such as inquiry and analytical procedures, to enhance overall evidence gathering.

Review Questions

• Compare and contrast non-statistical sampling with statistical sampling in terms of methodology and application.
  • Non-statistical sampling relies on the auditor's judgment for selecting items, while statistical sampling employs mathematical techniques to ensure every item has a known chance of being selected. Statistical methods allow auditors to quantify the level of assurance and project findings back to the entire population, providing a clearer picture of risks. In contrast, non-statistical sampling can be more flexible and intuitive but may lack a robust statistical basis for conclusions, leading to potential biases based on the auditor's experience.
• Discuss how non-statistical sampling can impact the evaluation of sample results during an audit.
  • When using non-statistical sampling, auditors evaluate sample results based on qualitative assessments rather than quantitative projections. This can lead to challenges in understanding the overall implications for the financial statements, as there’s no statistical basis for estimating the extent of misstatements in the entire population. The auditor must carefully consider whether the results from the sample sufficiently support their conclusions about control effectiveness and financial statement accuracy, often needing additional corroborating evidence.
• Evaluate the implications of using non-statistical sampling on an auditor's ability to identify material misstatements within a client's financial statements.
  • Using non-statistical sampling can significantly impact an auditor's ability to identify material misstatements because it relies heavily on judgment rather than systematic selection methods. This means that while certain high-risk areas may be effectively targeted, there is a risk that other potentially significant errors could be overlooked due to subjective choices made during sampling. Consequently, auditors must remain vigilant and ensure that their judgment is well-founded, supplemented by a thorough understanding of the client's operations and prior audit findings to minimize the likelihood of missing critical misstatements.

Related terms

Judgmental Sampling: A technique where auditors use their professional judgment to select items based on criteria like risk, significance, or relevance.

Sampling Risk: The risk that the auditor's conclusion based on a sample may be different from the conclusion if the entire population were tested.

Control Risk:

The risk that a material misstatement will not be prevented or detected on a timely basis by the entity's internal controls.