Auditing Basics: How Does Sampling Work?
by Joseph Kirkpatrick / May 24th, 2019
Why is Sampling Used During an Audit?
When an organization undergoes an audit, there’s often a large amount of internal controls that an auditor has to review. However, to make this process more efficient, auditors are likely to use sampling whenever the population being tested is uniform and there’s standards that are applied across the board.
How Do Auditors Use Sampling?
At KirkpatrickPrice, our auditors will sample a size of anywhere from 10 to 30 percent of any given population. This also means that the least number we will ever take of a population is three. So, for example, let’s say that an organization hires three employees that year, all of which read and signed acknowledgements that they understood their employee handbook. To verify that this is true, an auditor would test the entire population of three new employees. Likewise, if 100 new employees were hired that year, an auditor might only evaluate ten employees, or ten percent of the population, to ensure that this took place.
It’s important to note that when an auditor uses sampling during the assessment process, it’s randomly selected. This helps the auditor provide a fair, thorough, and accurate opinion on whether or not the controls are in place and operating effectively.
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When an auditor performs tests of controls, it may be appropriate to apply sampling. Sampling is used whenever the population of something is uniform and there’s standards that are applied across the board. For example, if we have a large population of, let’s say, 1,000. Our auditor may only take a maximum of 30 out of that total population to perform their testing. We like to use the percentage of 10 percent with a maximum of 30 percent. So, if you had 100 in a population, then we would take 10 percent of that and test 10 of the items. The least number we will ever take of a population is three. For example, if you only have three new employees who are hired and they had employee handbook acknowledgements that were signed, we would take all three of those. On the other hand, if 100 people were hired in the last year, we would take 10 percent of that, which would be 10 from that population. Whenever an auditor is applying sampling, the auditor will look at the total population, and will look at the documentation that’s produced from that population and randomly select the evidence from that in order to determine whether or not they can be reasonably assured that the control has been operating effectively.
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