CMA Intermediate · Corporate Accounting and Auditing
Audit Sampling, Audit Techniques and Analytical Procedure
Audit sampling means testing less than 100% of the items in a population and drawing a conclusion about the whole. Audit techniques are the methods used to collect evidence, analytical procedures compare and study relationships in data, and CAATs use software to test data. To solve questions, define the term, state the method, apply it and conclude.
What this chapter covers
This chapter explains how an auditor gets enough reliable evidence without checking every transaction. Large companies have thousands of entries, so the auditor selects a part and draws a conclusion on the whole. You study sampling concepts, statistical and non-statistical methods, sample design, size and evaluation, then selective testing, analytical procedures and computer-assisted audit techniques.
The chapter is mostly theory, with a few short calculations such as projecting errors from a sample. Questions are usually definitions, differences, advantages and limitations, and short explanations of when a method is used.
It connects directly to the rest of Corporate Accounting and Auditing. Audit evidence, risk assessment, internal control and the audit of company accounts all rely on the ideas here. Sampling and analytical procedures are the tools you use while performing the audit steps covered in other chapters, so a clear grasp here helps you answer those chapters better.
This chapter is easy to score in because the content is compact and the questions repeat familiar patterns such as meaning, objectives, methods, differences and limitations. It also supports MCQs, where the options test fine distinctions like sampling risk versus non-sampling risk, or statistical versus non-statistical sampling. Written answers can earn step marks through a clear structure, and the ideas help you in other audit chapters, so the effort you put in pays back more than once.
Audit Sampling, Audit Techniques and Analytical Procedure: topics in the order to study them
- 1Audit Sampling: Meaning and ConceptsStart here because every later topic uses its terms: population, sampling unit, sampling risk, non-sampling risk, tolerable error and anomaly.
- 2Sampling Methods: Statistical and Non-StatisticalOnce the terms are clear, learn how items are selected, such as random, systematic, monetary unit, haphazard and block selection, and how statistical differs from non-statistical.
- 3Sample Design, Size and Evaluation of ResultsThis applies the concepts: what shapes the sample design, what raises or lowers the sample size, and how you project and conclude on errors found.
- 4Audit Techniques and Selective TestingThis widens the view from sampling to the other ways of gathering evidence, and shows how selective testing sits beside sampling.
- 5Analytical ProceduresStudy this after the testing techniques, since it uses comparisons and relationships to assess risk, support evidence and review the final accounts.
- 6Computer-Assisted Audit Techniques (CAATs)Finish with CAATs, which bring together sampling, testing and analytics using software, so earlier topics make this one easy.
How to prepare Audit Sampling, Audit Techniques and Analytical Procedure
Treat this as a concept chapter. Aim to understand each term well enough to explain it in your own words and apply it to a small case.
- Read the first topic and write a one-page glossary of terms such as population, sampling risk, non-sampling risk, tolerable error and anomaly, each in one line.
- Make a comparison table in your notes for statistical versus non-statistical sampling and for each selection method, noting how it works, when it is used and one limitation.
- Learn the factors that increase or decrease sample size as a list, and be ready to give the reason for each direction.
- Practise the evaluation step: work out the error rate in a sample, project it to the population and compare it with tolerable error before stating a conclusion.
- List the audit techniques and the purpose of each, then link analytical procedures to the three stages of an audit: risk assessment, substantive testing and final review.
- Write short answers on CAATs covering what they are, examples, advantages and limitations, and time yourself.
- Finish with MCQs on each topic and review every wrong option to see which distinction you missed.
Common mistakes in Audit Sampling, Audit Techniques and Analytical Procedure
Mixing up sampling risk and non-sampling risk.
Fix: Remember that sampling risk comes only from testing a part, while non-sampling risk would exist even if you tested everything.
Saying statistical sampling is always better than non-statistical sampling.
Fix: Say both can give sufficient evidence if well designed; statistical sampling lets you measure sampling risk, while judgement is needed in both.
Stating sample size effects in the wrong direction.
Fix: Ask whether the factor raises the risk of missing an error. If yes, the sample grows; if no, it can shrink.
Concluding on a sample without projecting the errors.
Fix: Always calculate the error rate or amount, project it to the population, compare with tolerable error and then state the conclusion.
Treating analytical procedures as only a final review tool.
Fix: Link them to planning, substantive testing and the final review, and mention investigation of unusual variations.
Listing CAATs advantages without limitations.
Fix: Add limits such as set-up cost, need for skills and dependence on data integrity and controls.
Last-day revision: Audit Sampling, Audit Techniques and Analytical Procedure
- Audit sampling means applying procedures to fewer than 100% of items so every unit has a chance of selection.
- Sampling risk is the risk that the conclusion from the sample differs from testing the whole population.
- Non-sampling risk arises from causes unrelated to sample size, such as wrong procedures or misreading evidence.
- Tolerable error is the maximum error the auditor accepts in the population.
- An anomaly is an error shown to be not representative of the population.
- Statistical sampling uses random selection and probability theory to evaluate results; otherwise it is non-statistical.
- A larger sample is needed when risk is higher or tolerable error is lower.
- Project the errors found in the sample to the population before drawing a conclusion.
- Selective testing checks chosen items, but unlike sampling its results are not projected statistically to the whole population.
- Analytical procedures are used in risk assessment, as substantive procedures and in the overall final review.
- Unusual fluctuations found by analytical procedures need investigation and corroborating evidence.
- CAATs use software to test data, and they depend on reliable data and proper controls.
Audit Sampling, Audit Techniques and Analytical Procedure practice questions
- After evaluating a sample for tests of controls, the auditor concludes that sampling has not provided a reasonable basis for conclusions abo…
- According to SA 520, substantive analytical procedures are generally most applicable to which of the following?
- While testing a sample of payment vouchers for evidence of authorisation, an auditor selects a cheque that has been properly cancelled. Unde…
- Under SA 530 Audit Sampling, an auditor selects a cheque-payment voucher for testing, but the voucher turns out to be a voided one, so the a…
- Using audit software, an auditor extracts from the purchase ledger of Kaveri Traders Ltd all payments to vendors where the same invoice numb…
- Which statement about using CAATs to perform analytical procedures is consistent with SA 520?
- Which statement about the nature of analytical procedures is consistent with SA 520 Analytical Procedures?
- An auditor selects a sample of 40 invoices from a population of 2,000 by choosing a random starting point within the first 50 items and then…
Audit Sampling, Audit Techniques and Analytical Procedure in other exams
The same ground in other exams, if you are preparing for more than one or want another angle on it.
Audit Sampling, Audit Techniques and Analytical Procedure: frequently asked questions
Is Audit Sampling a numerical or theory chapter for CMA Inter?
It is mainly theory, with occasional small calculations on error rates and projection. You should be ready for definitions, differences and short explanations in both MCQs and written answers.
What is the difference between sampling risk and non-sampling risk?
Sampling risk is the chance that the auditor's conclusion from a sample differs from the conclusion if the whole population were tested. Non-sampling risk comes from other causes, such as using an inappropriate procedure or misinterpreting evidence, and it can be reduced by planning and supervision.
When are analytical procedures used in an audit?
They are used while assessing risks at planning, as substantive procedures to gather evidence, and near the end for an overall review of the financial statements. Any unusual relationship or fluctuation needs further investigation.
How should I answer a question on CAATs?
Define CAATs, give a few examples such as audit software and test data, then list advantages and limitations. Keep it in short points so each one earns a mark.