Auditors employ both statistical and non-statistical sampling methods in their audit procedures, each serving distinct purposes depending on the circumstances.

Statistical sampling is typically used when auditors aim for a high level of precision and want to make inferences about an entire population based on a sample. It involves applying mathematical formulas to determine sample sizes and evaluate results objectively. For instance, when examining a large number of invoices for accuracy, statistical sampling helps in estimating the extent of errors in the entire population of invoices.

On the other hand, non-statistical sampling is employed when precision isn't as crucial, and auditors use their judgment to select sample items based on their knowledge and experience. This method is practical for situations where the population is small or when auditors need to target specific high-risk areas. For instance, auditors might choose non-statistical sampling when reviewing management's estimates or assessing the accuracy of a unique transaction.

Significant events or transactions can have a substantial impact on financial statements. For instance, a material misstatement in revenue recognition or an error in the valuation of assets can significantly affect the financial statements, potentially leading to inaccurate financial reporting.

One challenge with non-statistical sampling methods is the risk of subjectivity and bias. Auditors may inadvertently select items that align with their expectations, which could introduce an element of confirmation bias. This can result in the overlooking of errors or misstatements that may be present in the population.

Auditors choose between statistical and non-statistical sampling methods based on the audit objectives and the characteristics of the population being tested. While both methods have their merits, auditors must exercise caution to minimize the challenges associated with non-statistical sampling, such as bias and subjectivity, to ensure accurate financial reporting.