Lesson: Attribute Sampling

Instructor: Nick Palazzolo

This lesson explains the concept of attribute sampling, which falls under statistical sampling and allows auditors to quantify sampling risk. This method is used to examine a population for the presence or absence of certain characteristics or attributes, helping auditors to test the effectiveness of a client's internal controls. Examples of attribute sampling include testing the completeness of sales transactions or confirming proper authorization of cash disbursements. Additionally, attribute sampling can be used to calculate a rate of occurrence based on yes or no questions. When deficiencies are found in attribute sampling, it raises concerns about potential systemic issues in the internal controls rather than just one-time errors.

Updated: June 22, 2023 Create an account

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Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Let's talk about this wonderful concept called attribute sampling. Now, this falls under statistical sampling. It's a method that follows statistical sampling, meaning we can quantify it, right? We can see the physical approaches allow auditors to quantify sampling risk. That's something we've seen before. Now, attribute sampling is a method used to examine a population for the presence or absence of certain factors. Pretty straightforward, right? It's within the name. Characteristics or attributes. We'll have an example. It can be used to test the effectiveness of the client's internal controls. We'll see that as well. So, for example, an auditor may use attribute sampling to test the completeness of the client's sales transactions by selecting a sample of sales invoices and confirming that they're recorded in the general ledger. You are examining the population for the presence or absence of certain characteristics. So you could analyze them for any attribute, right? By vendor, by number, by date, certain attributes to the specific transactions, whatever it may be to test particular occurrences of different transactions and attributes within them. As we said, it allows an auditor to quantify sampling risk as it is a statistical approach, and statistical approaches allow auditors to quantify sampling risk. Cool, cool. Sounds good. The auditor would then use the sample results to draw conclusions about the entire population of sales transactions. Additionally, this method could be used when the auditor is looking for a specific condition or occurrence, such as whether the invoices have been approved by the proper manager. So you have a listing of invoices. You've got the date, you've got the number for the invoice, you've got the vendor, you've got the approval by the manager. Those are all particular characteristics or attributes of each transaction that you could search for.

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