What is sample and process to calculate the number of samples in audit ?

The sample size in an audit refers to the number of items or transactions that are selected from the population for examination. The process for determining the sample size typically involves the following steps:

1. Define the population: Identify the universe of items or transactions that will be included in the audit.
2. Establish the audit objectives: Determine the specific information that the audit is intended to provide, such as detection of fraud or errors, or assessment of compliance with regulations.
3. Determine the level of precision and confidence required: Establish the acceptable level of risk for making incorrect conclusions, based on factors such as the size of the population, the cost of the audit, and the potential impact of any errors.
4. Select the sampling method: Choose the appropriate method for selecting items or transactions from the population, such as random sampling or stratified sampling.
5. Calculate the sample size: Use statistical formulas or software to determine the number of items or transactions that need to be selected for examination based on the audit objectives, precision and confidence required, and sampling method chosen.
6. Select the sample: Using the sample size and sampling method, select the items or transactions that will be examined during the audit.
7. Perform the audit: Inspect and evaluate the selected sample of items or transactions to achieve the audit objectives.
8. Draw conclusions: Based on the sample results, draw conclusions about the population as a whole and make recommendations for improvement, if necessary.

Reference Links:-

The Intersection of the Companies Act 2013 and Auditing in India: A Vital Nexus for Corporate Governance

The Psychology of Communication in Auditing: Understanding Client Behavior

CA Tushar Makkar
Ex-Pwc | CA AIR 47 Nov' 17 | YouTuber 16k+ | Expertise in audit and internal financial controls