Explain the major difference between statistical and nonstatistical sampling. What are the three main parts of statistical and nonstatistical methods?
(Objective 15-2)
Audit sampling methods can be divided into two broad categories: statistical sampling and nonstatistical sampling. These categories are similar in that they both involve three phases:
1. Plan the sample
2. Select the sample and perform the tests
3 Evaluate the results
The purpose of planning the sample is to make sure that the audit tests are per – formed in a manner that provides the desired sampling risk and minimizes the like – lihood of nonsampling error. Selecting the sample involves deciding how a sample is selected from the population. The auditor can perform the audit tests only after the sample items are selected. Evaluating the results is the drawing of conclusions based on the audit tests. Assume that an auditor selects a sample of 100 duplicate sales invoices from a population, tests each to determine whether a shipping document is attached, and determines that there are three exceptions. Let’s look at those actions step-by-step:
The Correct Answer and Explanation is :
Major Difference Between Statistical and Nonstatistical Sampling
The primary difference between statistical sampling and nonstatistical sampling is that statistical sampling uses probability theory and statistical techniques to determine sample size, select sample items, and evaluate results, whereas nonstatistical sampling relies on auditor judgment rather than formal statistical methods.
- Statistical Sampling: This method provides a measurable and objective way to control sampling risk by using probability techniques. It allows auditors to quantify the likelihood that a sample is representative of the entire population.
- Nonstatistical Sampling: In this approach, auditors apply their professional judgment to select the sample and evaluate results without using probability-based techniques. Although it can be effective, it does not provide a quantifiable measure of sampling risk.
Three Main Parts of Statistical and Nonstatistical Sampling
Both methods follow the same three phases:
1. Plan the Sample
- The auditor determines the sampling objectives, defines the population and sampling unit, and chooses an appropriate sampling method.
- In statistical sampling, this includes setting an acceptable level of sampling risk and using probability methods to determine sample size.
- In nonstatistical sampling, the auditor decides the sample size based on experience and professional judgment rather than statistical formulas.
2. Select the Sample and Perform the Tests
- The auditor chooses the sample using either statistical or nonstatistical techniques.
- Statistical sampling requires random selection (e.g., random number generators, systematic sampling).
- Nonstatistical sampling allows for haphazard or judgment-based selection.
- The auditor then performs the audit procedures on the selected sample.
3. Evaluate the Results
- The auditor analyzes the sample results and extrapolates them to the entire population.
- In statistical sampling, the auditor uses mathematical formulas to quantify sampling risk and determine whether the results are acceptable.
- In nonstatistical sampling, the auditor relies on professional judgment without statistical inferences.
For example, if an auditor selects 100 duplicate sales invoices and finds 3 exceptions, in statistical sampling, they would use probability-based techniques to determine the likelihood that similar exceptions exist in the entire population. In nonstatistical sampling, they would rely on judgment to conclude whether the number of exceptions is materially significant.
Thus, statistical sampling offers a more objective, quantifiable approach, while nonstatistical sampling depends on the auditor’s experience and intuition.