Audit sampling
In one sentenceExamining a selected part of transactions or balances instead of all of them, then extending the result to the whole population by professional judgment or a statistical method.
Simply put
When there are thousands of invoices, the auditor picks a sample of them: at random, by focusing on large amounts, or a mix of both.
If errors appear in the sample, the auditor estimates their effect on the whole population and may extend the testing if the expected effect is large.
Worked example
An auditor examined a sample of 60 purchase invoices out of 2,000 invoices at a restaurant and found 3 invoices without approval.
Sample size60 invoices
Exceptions in the sample3
Exception rate: 3 ÷ 605%
Error rate in the sample5%
Formula: Error rate = number of errors ÷ sample size