Which statement best describes the scope of statistical sampling in audits?

Which statement best describes the scope of statistical sampling in audits?

• A. It is only applicable to substantive testing.
• B. It is only useful for control testing with reprocessing.
• C. It applies to both controls testing and substantive testing.
• D. It is never appropriate for document examination.

Answer: (C)

Statistical sampling in audits is a way to draw conclusions about a whole population by examining a subset of items. This approach is versatile enough to be used for both tests of controls and substantive testing. For tests of controls, you sample transactions or control outcomes to assess whether the controls are functioning as intended, which helps determine the likelihood of misstatements occurring. For substantive testing, you sample items to obtain evidence about account balances and the validity of recorded amounts, focusing on assertions like existence, accuracy, and completeness. Document examination fits into this as well, since auditors often sample a subset of documents to support substantive conclusions. Because sampling can contribute evidence in multiple areas, the broad description that it applies to both controls testing and substantive testing is the best fit. The other statements are too restrictive or inaccurate since sampling is not limited to one type of testing and is commonly used in examining documents as part of substantive work.

Statistical sampling in audits is a way to draw conclusions about a whole population by examining a subset of items. This approach is versatile enough to be used for both tests of controls and substantive testing.

For tests of controls, you sample transactions or control outcomes to assess whether the controls are functioning as intended, which helps determine the likelihood of misstatements occurring. For substantive testing, you sample items to obtain evidence about account balances and the validity of recorded amounts, focusing on assertions like existence, accuracy, and completeness. Document examination fits into this as well, since auditors often sample a subset of documents to support substantive conclusions.

Because sampling can contribute evidence in multiple areas, the broad description that it applies to both controls testing and substantive testing is the best fit. The other statements are too restrictive or inaccurate since sampling is not limited to one type of testing and is commonly used in examining documents as part of substantive work.