Hagar, CPA, is performing the audit of a charitable organization that makes disb
ID: 360744 • Letter: H
Question
Hagar, CPA, is performing the audit of a charitable organization that makes disbursements to needy families over the holidays. One of Hagar's objectives is to determine the average disbursement made during the year. Because the number of disbursements is quite large, Hagar is looking for an alternative to investigating all disbursements. Someone mentions the possibility of sampling to Hagar. However, he is unaware of this type of analysis REQUIRED: (1) (2) Define the term sampling as used in auditing. Explain to Hagar the differences between statistical sampling and nonstatistical sampling. In your explanation, discuss the advantages and disadvantages of each of these methods.Explanation / Answer
1.The term sampling in audit is used to denote the application of audit procedure to less than 100 percent of the items within an account balance so that every single unit might have an equal probability of being selected.
2.Statistical sampling provides an objective measure of risk ,optimises the sample size and is best for large number of people in homogeneous transactions. Statistical sampling helps the auditor
1.To design an efficient sample.
2.To measure the sufficiency of the matter obtained.
3.To quantitatively evaluate the sample results.
Statistical sampling in other words is probability sampling in which every item under audit has a known chance of selection. The decision on the items to be selected is left to the laws of chance and not to judgement.The best feature of statistical sampling is the ability to measure risk.
Nonstatistical sampling
Any sampling procedure in which the risk cannot be measured is nonstatistical sampling. The auditor picks random sample and is not able to perform evaluator on the samples in the nonstatistical sampling. In other words it is called as judgemental sampling. The following items are selected on the auditors judgement than any other reason.
1.The sample size
2.The items selected for the sample group.
3.Methods of evaluation.
Nonstatistical sampling is best used when the population is less.It is also used in areas of specific records with sensitive informations.
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