1. Learning Objectives LO1 Explain the role of professional judgment in audit sampling decisions. LO2 Distinguish audit sampling work from nonsampling work. LO3 Compare and contrast statistical and nonstatistical sampling. LO4 Differentiate between beta risk, alpha risk, sampling and nonsampling risk. 1

2. Why Auditors Sample Auditors utilize audit sampling when:  the nature and materiality of the balance or class does not demand a 100% audit,  a decision must be made about the balance or class, and  the time and cost to audit 100% of the population would be too great. LO3 2

3. Statistical Sampling Auditors define statistical sampling as audit sampling that uses the laws of probability for selecting and evaluating a sample for the purpose of reaching a conclusion about the population.  A statistical sample is selected at random.  Statistical calculations are used to measure and express the results. LO3 3

4. Statistical Sampling Random sample:  Each population item has an equal likelihood of being selected in the sample.  A random sample is required for statistical sampling. LO3 4

5. Statistical Sampling Statistical methods can be used to generate the preliminary estimate of sample size.  A calculation of sample size is not required for a method to be considered statistical sampling. LO3 5

6. Nonstatistical (Judgmental) Sampling Non-statistical sampling is audit sampling in which auditors do not utilize statistical calculations to express the results.  The sample selection technique could be random or not.  Consideration of sampling risk in these circumstances means “giving sampling risk some thoughtful attention,” without direct knowledge or measurement of its magnitude. LO3 6