Lesson plan
Sampling risk
Sampling risk is a specific type of risk that auditors encounter when performing audit sampling procedures. Because examining 100% of a client's records is generally impractical and cost-prohibitive, auditors evaluate a representative sample of accounts instead. Due to the negative effects produced by sampling risk, an auditor may have to perform additional procedures which in turn can impact the overall efficiency of the audit. Sampling risk represents the possibility that an auditor's conclusion based on a sample is different from that reached if the entire population were subject to audit procedure. The auditor may conclude that material misstatements exist, when in fact they do not; or material misstatements do not exist but in fact they do exist. Auditors can lower the sampling risk by increasing the sampling size. Although there are many types of risks associated with the audit process, each type primarily has an effect on the overall audit engagement. The effects produced by sampling risk generally can increase audit risk, the risk that an entity's financial statements will contain a material misstatement, though given an unqualified ('clean') audit report. Sampling risk can also increase detection risk which suggests the possibility that an auditor will not find material misstatements relating to the financial statements through substantive tests and analysis.
Article summary
Sampling risk is a specific type of risk that auditors encounter when performing audit sampling procedures. Because examining 100% of a client's records is generally impractical and cost-prohibitive, auditors evaluate a representative sample of accounts instead. Due to the negative effects produced by sampling risk, an auditor may have to perform additional procedures which in turn can impact the overall efficiency of the audit. Sampling risk represents the possibility that an auditor's conclusion based on a sample is different from that reached if the entire population were subject to audit procedure. The auditor may conclude that material misstatements exist, when in fact they do not; or material misstatements do not exist but in fact they do exist. Auditors can lower the sampling risk by increasing the sampling size. Although there are many types of risks associated with the audit process, each type primarily has an effect on the overall audit engagement. The effects produced by sampling risk generally can increase audit risk, the risk that an entity's financial statements will contain a material misstatement, though given an unqualified ('clean') audit report. Sampling risk can also increase detection risk which suggests the possibility that an auditor will not find material misstatements relating to the financial statements through substantive tests and analysis.
Key claims
No claims recorded.
Discussion questions
- Summarise the article in your own words. Which single claim would you verify first, and why?
- Which claim in this article is most likely to be revised as the sources update? How would you check its current status?
- If two sources disagreed about one of these facts, what would you need in order to trust one over the other?
Bibliography
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Key claims and bibliography are generated from the same tracked claims and sources as the article page.