Lesson: Sampling and Non-Sampling Risk

In this lesson, the concept of sampling risk and non-sampling risk is discussed in detail. Sampling risk arises from the possibility that the auditor's conclusions may differ if the tests were applied to the whole population rather than a sample. The lesson explains how sampling risk varies inversely with sample size and offers professional judgment advice on managing this risk. Two key areas of concern when performing substantive tests of details are illustrated: the risk of incorrect acceptance and incorrect rejection. The lesson also covers two aspects of sampling risk in performing tests of controls, specifically the risk of assessing control risk too low and assessing control risk too high. The concept of non-sampling risk is introduced, highlighting that it includes all aspects of audit risk not due to sampling, such as selecting inappropriate audit procedures.