Sampling risk definition
/What is Sampling Risk?
Sampling risk is the possibility that the items selected in a sample are not truly representative of the population being tested. This is a major issue, since an auditor does not have the time to examine an entire population and so must rely upon a sample.
Types of Sampling Risk
There are two types of sampling risk that can arise. They are as follows:
Risk of incorrect acceptance. An auditor erroneously concludes that there are fewer problems with the population than expected. This means that there is actually a significant risk of a material misstatement, which can lead to an incorrect auditor’s opinion on a client’s financial statements.
Risk of incorrect rejection. An auditor erroneously concludes that there are more problems than expected, and so expands the sample size to see if this is really the case, which is not a good use of his or her time. The result may be a substantial additional effort on unnecessary testing, or the use of a replacement test.