 in this presentation we will discuss types of audit sampling. Auditing standards recognize and permit both statistical and non-statistical methods of audit sampling. So what are statistical and non-statistical methods of audit sampling? First a word from our sponsor. Well actually these are just items that we picked from the YouTube shopping affiliate program but that's actually good for you because these aren't things that were just given to us from some large corporation which we don't even use in exchange for us selling them to you. These are things that we actually researched, purchased and used ourselves. Here we have a western digital WD elements 20 terabyte USB 3.0 desktop external hard drive we use as part of our backup system noting that if you lower the number of terabytes of storage the price will lower dramatically as well. 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The auditor uses the most efficient sample size and quantifies sampling risk so when we think about statistical sampling as opposed to non statistical sampling we're thinking about a more formal type of sample selection and the more formal sample selection using statistics using statistical mathematical analysis can give us a more formal approach and give us more exact types of calculations than a non statistical method non statistical sampling auditor does not use statistical techniques to determine sample size select the sample items or measure sampling risk and of the two you might be saying well why would we do one or the other in other words why wouldn't we use statistical sampling when it seems to be the more accurate way to go of course part of the part of that is going to be cost effectiveness and complexity with statistical sampling the advantages of statistical sampling are it can design an efficient sample so we can design an efficient sample and therefore and when we think about the sample size what we want to do is to create a population as small as possible that we can do the least work as as we need in other way if you are thinking about pulling people to get their opinion or the population's opinion on something you would like to pull as few people as possible in order to get an accurate opinion and that's what statistical sampling is better at doing is better at giving us a very efficient sample size whereas if we were just to basically not use statistical sampling we would have to select a sample size that seems reasonable without being as efficient and therefore probably be overestimating the sample size probably leaning towards that side of things and therefore possibly doing more testing as a result of not being as accurate on the sample can measure the sufficiency of evidence obtained once we have the evidence we can we can know we don't have to just say hey look the evidence says this we could have at more accurate type of statistical measures as to how accurate the sample can be using statistical measures as opposed to saying well this is just what our sample says with regards to this assertion and we're just going to apply it out we can give more specific types of calculations can quantify sampling risk so we can actually quantify the sampling risk instead of us doing as we would do with non statistical which would basically say we're going to set the risk at these levels and then and then basically do our sample and see if that's going to correlate in this case we can actually quantify put a number to the sampling risk disadvantage of statistical sampling so you might say well why wouldn't we do the statistical sampling then well cost more to train auditors in the techniques statistics isn't the most easy thing to do obviously and there's a lot of just like when you think about statistics being applied to different types of samples and pulling and all the kind of things that can the problems that can be in statistical sampling we got to be aware of those types of things as well when we apply statistical sampling to whatever type of sample we are testing for cost more to design and conduct sampling application so obviously to design a statistical sample we're going to have a more formal study we're going to be more exact and precise there's got to be a cost benefit analysis anytime we have something such as that there's a lack of consistent application across audit teams so different audit teams could have different applications rather than us having just basically a set of general rules if we have non statistical sampling we might just basically have a set of rules which would actually be possibly more formalized across different teams to statistical sampling techniques we have attribute sampling we have monetary unit sampling we have classical variables sampling now we'll go into these in more depth starting with the attribute sampling so attribute sampling used to estimate the proportion of a population that possesses a specified characteristic test of controls are the most common use of attributes sampling so we're going to often use it to test the controls and remember the two things we're going to be testing oftentimes with sample sizes test of controls and substantive type testing examples the businesses controls require that all checks have two independent signatures so that's going to be one of the controls that we have the auditors can plan a test of that control using the attribute sampling so attribute sampling sampling then can be applied to see whether that control is indeed in place then we have monetary sampling another type of statistical sampling unit sampling uses attribute sampling theory to estimate the dollar amount of misstatement for a class of transactions or an account balance so now we're going to use similar theory looking for the dollar amount however often used over the classical variable sampling because it has a number of advantages over the classical variable sampling and then we'll take a look at the classical variable sampling auditors sometimes use classical variables sampling to estimate the dollar value of a class of transactions or account balance it is more often used to determine whether an account is materially misstated