Statistical Sampling in Audit for the NSO Introduction

Statistical Sampling in Audit for the NSO ¬Introduction to Statistical Sampling 1 Comptroller & Auditor General of India

Statistical Sampling in Audit for the NSO What is a sample ? ¬A sample is a group of units selected from larger group (the population). ¬By studying the sample one hopes to draw valid conclusion about the population. It may be statistical or Comptroller & Auditor General of India nonstatistical. 2

What is Statistical Sampling ? The essential features of statistical sampling are: 1) The sample units (or transactions) should have a known probability of selection. 2) The sample result should be evaluated mathematically, that is in accordance with probability theory. Comptroller & Auditor General of India 3

Advantages of Statistical Sampling ¬ The sample results are objective and defensible as it is free from any kind of bias. ¬ The method provides a means of advance estimate of sample size. ¬ The method provides an estimate of the sampling error. ¬ It can save time & money. ¬ Statistical samples may be combined and evaluated , even though accomplished by different auditors. Comptroller & Auditor General of India 4

Two broad categories of Statistical Sampling ¬ In attribute sampling one selects the sampling unit randomly to estimate number of time an event occur in the population. It answer the question, How many ? ¬ In variable sampling one selects the sampling unit randomly to estimate population average or total. It answer the question, How much? Comptroller & Auditor General of India 5

Sampling vs. Non-sampling error ¬ Sampling error is generated due to failure of selecting the representative sample. It is measurable under statistical sampling. ¬ Non-sampling error is generated due to failure of measurement of true characteristic(s). Which may be due to, i) non-response ii) measurement error iii)fatigue & iv)others. which can be controlled my better training & management etc. There is no standard procedure to measure this error. Comptroller & Auditor General of India 6

Types of Statistical Sampling ¬ Simple Random Sampling ¬ Systematic Random Sampling ¬ Probability Proportional to Size ¬ Monetary Unit Sampling ¬ Stratified Sampling ¬ Cluster sampling ¬ Multistage Sampling Comptroller & Auditor General of India 7

The principal steps in auditing using statistical sampling : ¬ Objective ¬ Population definition ¬ Degree of precision desired ¬ The Sampling Frame ¬ Selection of samples ¬ Preparation of Questionnaires/Data Format ¬ Audit of selected units. ¬ Recoding of audit observation in the prescribed data format ¬ Statistical evaluation of survey results ¬ Report writing Comptroller & Auditor General of India 8

Statistical Sampling in Audit for the NSO Any Questions ? 9 Comptroller & Auditor General of India