Answered: different types of sampling risks

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question 3 Why do auditors use audit sampling to determine material misstatements in financial statements? Why not just test every single item and every transaction? Many people often think that auditing every single transaction is ideal, but that is actually not the case. Sampling can be defined as the process of examining only part of a set of data/population, sufficient to gain reasonable assurance regarding the entire data/population. Auditors always try their best to pick a sample that is representative of the population. However, it is not always possible to get a truly representative sample, due to bad luck or pure errors in judgment. You are required to discuss sampling risks and the different types of sampling risks that exist and provide an example for each of these types.

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