Academic journal article Accounting Horizons

Sampling Practices of Auditors in Public Accounting, Industry, and Government

Academic journal article Accounting Horizons

Sampling Practices of Auditors in Public Accounting, Industry, and Government

Article excerpt

SYNOPSIS: Although audit sampling is a common procedure, relatively little is known about the sampling practices of auditors in public accounting, industry, and government. This study surveyed practicing auditors to determine how they: (1) planned sample sizes, (2) selected sample items, and (3) evaluated sample outcomes. Respondents also provided data on the training received, debiasing techniques employed when using nonstatistical (judgmental) methods, and literature sources relied on to provide guidance regarding sampling matters.

Respondents in all areas of practice reported that a majority of audit sampling applications rely on nonstatistical methods for sample planning, selection, and evaluation. Despite the heavy reliance on nonstatistical methods, less than 10 percent of respondents reported receiving training in debiasing techniques, and no respondents reported using these techniques. Among statistical methods dollar-unit sampling is the most frequently employed technique. All respondents reported reliance on employer guidelines, and most reported reliance on sampling standards promulgated by the American Institute of Certified Public Accountants.

Keywords: sampling practices; audit sampling.

INTRODUCTION

Although audit sampling is a common procedure, relatively little is known about the sampling practices of auditors in public accounting, industry, and government. With the exception of Hitzig's (1995) survey of public accounting firms in New York, most published studies are 20 years old and focus on the use of statistical methods by auditors in public accounting (see McRae 1982; Ross et al. 1981; Bedingfield 1975). One limitation common to all prior studies is that their survey instruments asked only if auditors used certain sampling techniques, but did not inquire about the frequency of use for each alternative method.

To provide a more complete understanding of sampling practices this study surveyed auditors in public accounting, industry, and government. (1) Issues investigated include the relative frequency of use of alternative methods for sample size planning, sample selection, and sample evaluation. We also collected data on the training received by auditors, literature sources relied on for guidance, and the use of debiasing techniques when employing nonstatistical (judgmental) methods.

Survey respondents in public accounting, industry, and government reported similar sampling practices. Most audit sampling applications rely on nonstatistical methods for sample planning, selection, and evaluation. In spite of the heavy reliance on nonstatistical methods, less than 10 percent of respondents reported receiving training in debiasing techniques, and no respondents reported using these techniques. Among statistical methods, dollar-unit sampling is the most frequently employed technique. All respondents reported reliance on employer guidelines, and most reported reliance on sampling standards promulgated by the American Institute of Certified Public Accountants.

These findings enable audit practitioners to benchmark their sampling practices against current norms of the profession. Further, in federal court proceedings the decision to accept sample evidence hinges on whether the facts or data are "of a type reasonably relied on by experts in the particular field in forming opinions or inferences upon the subject" (Federal Judicial Center 1994, 227). By documenting the current state of sampling practice this study provides potentially useful information for auditors and their attorneys, should an audit sample be challenged in court. Audit educators may use these findings when planning their course content, while students can use the findings to understand extant practice.

METHODOLOGY

Survey Instrument

We developed the survey instrument to obtain auditors' opinions and estimates regarding sampling practices they employed in the six months before they received the instrument. …

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