## **Learning Outcomes**

After reading this article, you will be able to define audit sampling, explain its purpose in the audit process, and understand why auditors use sampling instead of examining all transactions. You will also identify key factors affecting sampling decisions and recognize the relevance of audit sampling in providing reliable evidence for the ACCA FAU exam.

## **ACCA Foundations in Audit (FAU) Syllabus**

For ACCA Foundations in Audit (FAU), you are required to understand the fundamental concepts of audit sampling as part of gathering sufficient appropriate audit evidence. In particular, this article covers:

- The definition of audit sampling according to international auditing standards
- The reasons for using sampling in audits
- The relevance of sampling to the auditor’s work
- The distinction between sampling and full population examination
- The role of audit sampling in drawing conclusions about financial statements

## **Test Your Knowledge**

_Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision._

1. What is audit sampling, and how does it differ from examining 100% of a population?
2. Why do auditors generally use sampling rather than testing every transaction?
3. When might it be inappropriate for an auditor to use sampling?
4. What must an audit sample allow the auditor to do in order to provide a reliable conclusion?

## **Introduction**

An audit rarely involves inspecting every transaction or balance. For efficiency and practicality, auditors usually test only a portion of transactions. This process is called **audit sampling**, and it allows auditors to form opinions on the entire population by examining a carefully selected subset. Proper use of sampling is essential for effective audit evidence gathering and is examinable at FAU level.

> **Key Term: Audit sampling**
> The application of audit procedures to less than 100% of items within a population, so that all sampling units have a chance of selection, in order to provide a reasonable basis for drawing conclusions about the entire population.

## **Definition and Purpose of Audit Sampling**

Audit sampling involves selecting and testing a portion of transactions or balances rather than every single item. Auditing standards, such as ISA 530, require that sampling is used when it is not practical or efficient to test all items. For most areas with large numbers of similar transactions (such as sales invoices), it would be unsustainable to check everything. Sampling allows the auditor to balance thoroughness with efficiency, while still providing reliable support for the audit opinion.

## **Why Auditors Use Sampling**

There are practical and theoretical reasons why sampling is used in audits:

- **Volume of transactions:** Large businesses may process thousands of transactions, making complete testing unfeasible within typical audit timeframes.
- **Time and cost constraints:** Testing every item would greatly increase the cost and length of the audit, without proportionate benefit.
- **Sufficient evidence:** Well-designed sampling allows auditors to draw conclusions about the accuracy or effectiveness of processes across the whole population, assuming that the sample is representative.
- **Standards compliance:** Auditing standards require auditors to gather enough appropriate audit evidence, and sampling is recognized as a valid method to achieve this.

### **Worked Example 1.1**

**A company issues 20,000 sales invoices in a year. Is the auditor expected to check every invoice? How does sampling help in this situation?**

> **Answer:**
> The auditor would not check all 20,000 invoices. Instead, a sample might be selected and tested for proper recording, authorization, and accuracy. If the sample is representative and no significant errors are found, the auditor can infer that the overall population of invoices is free from material misstatement.

## **Relevance of Sampling to Audit Evidence**

The main objective of using sampling is to enable the auditor to draw valid conclusions about the population as a whole. Sampling supports the auditor in forming an opinion on the truth and fairness of financial statements by providing reasonable—though not absolute—assurance based on tested evidence.

> **Key Term: Population**
> All items within the group of transactions or balances from which a sample is drawn for audit testing.
>
> **Key Term: Sampling risk**
> The risk that the auditor’s conclusion based on a sample could differ from the conclusion if the entire population was tested.

## **When Full Examination is Preferred**

Although sampling is standard practice, there are situations in which full population testing might be appropriate:

- The population is very small
- All items are individually material, such as director bonus payments
- The auditor suspects fraud or significant irregularity, requiring complete review
- Each item is unique and cannot be grouped for representative sampling

In most other cases, using sampling is more efficient and aligns with audit standards.

### **Worked Example 1.2**

**An auditor is reviewing director expense payments: total of 3 transactions in the year. Should they use sampling or test all three?**

> **Answer:**
> Since there are only 3 items and each is material by its nature, the auditor should test 100% of these transactions rather than sample.

### **Exam Warning**

> One common mistake is to assume that sampling eliminates all audit risk. There is always a risk that errors or misstatements not present in the sample may exist in the untested items. Auditors must accept that sampling only provides reasonable, not absolute, assurance.

## **Summary**

Audit sampling is a core audit technique that permits efficient testing of large populations. Provided that the sample is representative, the auditor can draw conclusions about the entire group without reviewing every item. Understanding the purpose and limitations of audit sampling is key for the ACCA exam.

## **Key Point Checklist**

_This article has covered the following key knowledge points:_

- Define audit sampling and explain its purpose in audits
- Describe why auditors use samples instead of testing everything
- State when sampling is and is not appropriate
- Understand sampling risk and its consequences for audit conclusions
- Recognize the relationship between sampling, audit evidence, and forming audit opinions

## **Key Terms and Concepts**

- Audit sampling
- Population
- Sampling risk

Audit sampling - Definition and relevance