Welcome to this comprehensive guide on sampling risk in auditing, a crucial topic for CPA exam preparation. This video explores the concept of sampling, its importance in auditing, and the associated risks.
Understanding Sampling in Auditing
Sampling is a vital technique in auditing due to time and cost constraints. Auditors cannot examine all vouchers and documents in a company, so they must rely on samples to draw conclusions about the entire population1. This approach, while necessary, introduces sampling risk into the audit process.
Types of Audit Risks
There are two main types of risks in auditing:
Sampling Risk: Occurs when conclusions about a population, based on a sample, are incorrect due to the sample not being representative of the entire population1.
Non-sampling Risk: Audit risk that does not involve sampling, such as an auditor failing to observe physical verification of inventory.
Types of Sampling Risk
Sampling risk can be further divided into two categories:
Type 1 Risk: All is well, but the sample is not well.
Type 2 Risk: All is not well, but the sample is well

See the explanation with practical examples and questions at the end.

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CPA Exam-Audit Statistical Sampling

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