Explain the advantages of Statistical Sampling in Auditing.

Auditing and Assurance Revision Questions and Answers

Answer:
The advantages of statistical sampling may be summarized as follows:

1. The amount of testing (sample size) does not increase in proportion to the increase in the size of the area (universe) tested.

2. The sample selection is more objective and theremore defensible.

3. The method provides a means of estimating the minimum sample size associated with specified risk and precision.

4. It provides a means for deriving a “calculated risk” and corresponding precision (sample error) i.e. the probable difference in result due to the use of a sample in lieu of examining all the records in the group (universe), using the same audit procedures.

5. It may provide a better description of a large mass of data than a complete examination of all the data, since non-sampling errors such as processing and clerical mistakes are not as large.
Under some audit circumstances, statistical sampling methods may not be appropriate. The auditor should not attempt to use statistical sampling when another approach is either necessary or will provide satisfactory information in less time or with less effort, for instance when exact accuracy is required or in case of legal requirement etc.



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