Learning Outcomes
After reading this article, you will be able to describe the main audit sampling selection methods used in external audit. You will distinguish between random, systematic, and haphazard sampling, identify the need for representativeness, and apply these methods to tests of control and substantive procedures. You will understand the advantages, limitations, and common mistakes relating to sample selection for the ACCA FAU exam.
ACCA Foundations in Audit (FAU) Syllabus
For ACCA Foundations in Audit (FAU), you are required to understand how sampling selection methods work in the audit process and their impact on audit evidence. In your revision, focus on:
- Defining audit sampling and its relevance to the audit
- Identifying and explaining main sampling selection methods: random, systematic, and haphazard selection
- Describing how and when each method is applied
- Explaining requirements for a representative sample
- Recognising factors influencing sample selection and potential limitations
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.
- Which sampling method ensures every item in the population has an equal chance of selection?
- In systematic selection, how is the sampling interval determined?
- True or false? Haphazard selection produces a statistically valid random sample.
- Briefly explain one risk if a sample is not representative of the population.
- What type of items are best suited to block selection, and why is this method generally discouraged?
Introduction
Audit sampling enables auditors to reach conclusions about a population without examining every item, saving time and resources while still providing sufficient evidence for an audit opinion. Choosing the right method for selecting items is fundamental to reliable results and reducing audit risk. Weak sample selection can lead to invalid conclusions and increase the chance of missing material misstatement.
Sampling selection methods must be carefully planned so that the sample is representative, avoids bias, and enables valid inferences about the population. This article sets out the commonly used methods for selecting audit samples and highlights their correct application for ACCA exam purposes.
Key Term: Audit sampling
The application of audit procedures to less than 100% of items in a population so that all sampling units have a chance of selection, providing a reasonable basis for conclusions about the population.
Audit Sampling Methods
Why Use Sampling Selection Methods?
Sampling is used where populations are large, made up of similar items, and it is not cost effective to examine all transactions. The value of sampling depends on how the sample is selected and how results are applied.
Random Selection
Random selection gives every item in the population an equal statistical chance of being chosen.
Key Term: Random selection
A sample selection method in which every item in the population has the same probability of selection as every other item.
Features
- Avoids human bias
- Often involves using random number tables or computer-generated random sequences
- Example: Use a spreadsheet to generate 25 random numbers between 1 and 2,000 to select invoices for testing
Random selection is appropriate for both control testing and substantive procedures, and is preferred when statistical conclusions are needed.
Systematic Selection
Systematic selection involves choosing every nth item from a population after a random starting point.
Key Term: Systematic selection
A sampling method where items are selected using a fixed interval (sampling interval), starting from a random point in the population.
Features - Systematic Selection
- The sampling interval is calculated as the population size divided by the desired sample size
- Example: If there are 500 invoices and a required sample size of 20, select every 25th invoice after a randomly chosen starting invoice between 1 and 25
Systematic selection is efficient when records are organized sequentially, as in accounting ledgers. However, caution is needed to avoid selecting items in a way that matches any inherent periodic patterns, which could bias results.
Haphazard Selection
Key Term: Haphazard selection
A method where the auditor selects sample items without following any structured technique, aiming to avoid conscious bias.
Haphazard selection is non-statistical. The auditor chooses items arbitrarily, avoiding any predictable pattern. While not fully random, this method is often used for small populations or when auditors do not need statistical inference. Care must be taken not to introduce unconscious bias (e.g. picking only easily accessible items).
Key Term: Block selection
Selecting a contiguous group of items, such as all invoices from a certain week, which is generally not recommended due to high risk of unrepresentative sampling.
Block Selection and Value-Weighted Selection
Block selection, where an entire block (such as a day, week, or alphabetical segment) is chosen, is rarely appropriate for audit evidence as it may not represent the population's overall characteristics. Value-weighted selection, where items are picked based on their monetary value (e.g. monetary unit sampling), gives higher-value items a greater chance of selection. This is covered separately in substantive audit procedures for high-value balances.
Representativeness and Sampling Risk
A key requirement for any sampling method is that the resulting sample is representative of the whole population. If certain items are more or less likely to be chosen, the results may not be valid.
Key Term: Representative sample
A sample in which the characteristics of the selected items mirror those of the entire population, enabling valid conclusions.
Sampling risk arises if the sample chosen is not representative, leading to an incorrect conclusion about the population.
Key Term: Sampling risk
The risk that the auditor’s conclusion based on a sample differs from the conclusion if the entire population was tested.
Factors Affecting Choice of Method
- The purpose of audit testing (control or substantive)
- Population structure (random/systematic suited to homogeneous populations)
- Availability of computerized records (for random/systematic selection)
- Population ordering (avoid systematic patterns for systematic selection)
Worked Example 1.1
You need to test accuracy of payroll calculations for 200 employees. Suggest an appropriate sampling selection method and explain why.
Answer:
- Use random or systematic selection since payroll data is uniformly structured, and each employee transaction is similar.
- Random selection ensures every worker is equally likely to be picked, while systematic selection (e.g. every 10th employee after a random start between 1–10) gives even coverage and is easy to apply.
Worked Example 1.2
An auditor selects all sales invoices from the first two weeks in January to test for accuracy. Explain a limitation with this sampling method.
Answer:
- This is block selection; it risks being unrepresentative, as it only reflects sales activity for one part of the year.
- Any trends, errors, or changes that happened at other times will be missed, leading to sampling risk.
Exam Warning
It is a common error to describe haphazard selection as “random.” In ACCA exams, only properly executed random selection (using random numbers) is valid as true random sampling; haphazard selection is a non-statistical alternative and not equivalent.
Summary
Proper sample selection is essential for reliable audit evidence. Random and systematic sampling methods are preferred wherever possible, as they maximize the chance of selecting a representative sample. Haphazard selection may be used in practice, but must be unbiased and is not a substitute for random selection. Block selection should be used only with care and rarely provides valid coverage. The auditor must always consider representativeness and document the sampling approach clearly.
Key Point Checklist
This article has covered the following key knowledge points:
- Define audit sampling and explain its importance in audit evidence
- Distinguish between random, systematic, haphazard, and block selection
- Explain how to achieve a representative sample and avoid bias
- Identify the factors affecting choice of sampling selection method
- Understand the risks of unrepresentative samples (sampling risk) in audit conclusions
Key Terms and Concepts
- Audit sampling
- Random selection
- Systematic selection
- Haphazard selection
- Block selection
- Representative sample
- Sampling risk