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Volume :14 Issue : 2 1986      Add To Cart                                                                    Download

Judgment Sampling in Auditing: Towards More Objective Standards

Auther : Ibrahim O.Shahin

External Auditing is currently restricted to an audit sample. The external auditor determines this sample which he audits with the assistance of his assistants. Based on this audit he expresses his opinion regarding the audited financial the statements (i.e. the whole universe) in his audit report. This approach is termed “Audit Testing”.

Audit Testing has replaced detailed 100% verification of the whole audit universe which existed previously. This shift took place around the turn of the century as a result of various factors which made such detailed audits uneconomic and impractical except in some exceptional cases.

For a long time the auditors determined their audit tests solely on the basis of their personal judgment (Judgment Sampling). However, judgment sampling has been criticized in recent years because of its subjectivity and the possibilities of sample biases as well as over auditing or under auditing. The use of statistical sampling techniques has been advocated as an alternative approach which is more objective and scientific. Academic and professional interest in statistical sampling has been increasing and many auditors have started learning these techniques and applying them in their audits.

Recent surveys and observations have, however, indicated the use of statistical sampling is still limited and that the vast majority of external auditors are still adopting “judgment sampling” techniques.

Indications are that the vast majority of external auditors will continue adopting, “judgment sampling” in the foreseeable future. Furthermore, recent trends in auditing theory, logic and practice suggest the possible emergence of a normative model “of the auditing process” which could also improve judgment sampling. On the other hand some advocates of this new approach suggest limiting the role of statistical sampling within such a framework.

Accordingly, the objectives of this paper are:

(i) To identify the best possible approach for audit sampling within the current state of knowledge.

(ii) To suggest the best possible means for using judgment sampling in a manner that could decrease its disadvantages as an aid to its users and as a step towards the best approach.

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