Auditing - Types of Sampling Ways - Essay Example

Sampling methods

Random Sampling

Random sampling involves the assigning of a sequential number to the items of the universe. This sampling is used where the sequential numbering of the universe exists.

Systematic Sampling

The systematic sampling method is used by taking every nth item, and selecting a starting point from a random number.

Stratified Sampling

The stratified method uses the breaking of the sample into subgroups. Each of the subgroups will be sampled independently.

Cluster Sampling

Cluster Sampling is done to increase the speed with which certain samples are drawn on a cluster basis (Resource Management Services, Inc, 1994).  

Methods to Use

The statistical method needs to be used for its validity. Simple random, Systematic, and stratified sampling is to be used.

Affects

The statistical sampling is based upon the mathematical sound values and pre-determined values giving total reliability and verified data. Non-statistical sampling is upon the auditor’s judgment and subjected to biasness (Resource Management Services, Inc, 1994).   

Question 2

In the process of performing auditing procedures, the population needs to be well defined for its true and perfect representation which will help in providing effective decisions to the client’s reliability and internal control of daily transactions. The pre-defined sample provides a systematic and simple procedural approach while auditing and tends to increase the work speed (Indiana University–Purdue University Fort Wayne, n.d.).

There are certain risks and errors while determining the sample size. The risk, the tolerable error, and the expected error are the significant factors that are liable to affect the sample. In such cases, the sample size will be misleading and the probability of biasness will be high.  

The sample which is not properly designed and selected is subjected to risks and errors. This will increase the viability of the truth and validity of the data and provide a misrepresentation of the facts. The misrepresentation will provide a false situation of the financial condition and facilitate a deceptive course of action to be taken, hampering the performance of the business in due course of time (Hong Kong Institute of Certified Public Accountants, 1997).

Question 3

The auditor needs to evaluate the result of auditing procedures based on certain facts. The audit process should provide a premise of analytical review for the test of transactions and balances. The audit program should be detailed properly with proper compliance with the generally accepted auditing standards (Fayetteville State University, n.d.).

The qualitative factors that need to be considered while encountering an error may be due to misrepresentation of documentation, representation by management in providing guidelines, misinterpretation of facts, and mistakes in the application of accounting principles related to measurement, classification, recognition, disclosure, and presentation.  The mistake in processing and gathering data from which financial statements are prepared can be a cause for such a scenario (Hong Kong Institute of Certified Public Accountants, 2004).

The audit conclusion gets affected in terms of inefficiency to verify all the items to be audited causing reliability upon the specific sample size. The probability of a conclusion may be risky and subject to validity with proper reasoning and the reliability of the fact that may be in question.