Appropriate Places to Use Audit Sampling - Coursework Example

Appropriate places to use audit sampling According to the ISA 530, Audit Sampling and Other Selective Testing procedures, audit sampling, can be applied to all audit assignments aimed at examining the account balances items. This is through the application of audit procedures to less than 100% of the items contained in the account balance or transaction classes, granting all sampling units equal selection chances (Guy, Carmichael & Whittington, 2002). Question  2: Risks associated with all sampling procedures Audit sampling entails the use of formalized procedures that are used to offer auditors innumerable benefits (Gray, 2007).

However, there are two major forms of risks associated with these procedures. First, is sampling risk, which is the risk that a sample identified may not be demonstrative of the total populace it is drawn from; hence, resulting in the auditor’s conclusion becoming dissimilar from what would have been attained if the entire population was examined (Guy, Carmichael & Whittington, 2002). As a result, sampling risk may result in two other forms of auditing risks: a. Alpha Risk (Risk of incorrect rejection), arising due to the sample indicating higher error levels than the actual case, and the risk affecting the audit efficiency.

It can be resolved through the performing of additional audit work (Guy, Carmichael & Whittington, 2002).b. Beta Risk (Risk of incorrect acceptance), which arises due to the failure to detect a material error in a population due to the insufficiency of selected sample items containing errors. As a result, the audit effectiveness is affected, and the risk can be quantified by using statistical sampling procedures and detected by using other complementary audit procedures complementary sampling (Gray, 2007).

Second, there is a non-sampling risk that results from factors that cause the auditor to make erroneous conclusions for reasons not related to sample size. Subsequently, the risk can arise due to the failure of the auditors to recognize the errors of individual items in a sample. Nevertheless, the risk can be minimalized through the ensured proper audit planning, supervision and review by the auditors (Gray, 2007)