Distinguish between sampling risk and nonsampling risk. How can each be reduced?

Choose the correct statements concerning sampling and nonsampling risk. (Select all that apply.)

A.

Sampling risk is an inherent part of sampling because the auditor is not testing the entire population.

B.

Nonsampling risk is the risk that an auditor reaches the wrong conclusion for any reason other than sampling risk.

C.

Sampling risk is the risk that the auditor reaches the wrong conclusion because a sample is not representative of the population.

D.

Sampling risk is the risk that an auditor reaches the wrong conclusion for any reason other than sampling risk.

E.

An example of nonsampling risk is the risk that the auditor may perform procedures incorrectly or fail to correctly interpret the audit evidence.

F.

An example of sampling risk is the risk that the auditor may perform procedures incorrectly or fail to correctly interpret the audit evidence.

G.

Nonsampling risk is the risk that the auditor reaches the wrong conclusion because a sample is not representative of the population.

H.

Nonsampling risk is an inherent part of sampling because the auditor is not testing the entire population.

How can each be reduced?

To reduce sampling risk, the auditor could

decrease

increase

sample size or use a sampling method that

decreases

increases

the likelihood of having a representative sample. To reduce nonsampling risk, the auditor can follow auditing standards related to

careful design of audit procedures, proper instruction, supervision

planning and selection of the sample, testing of the sample population

selection of items from a population such that each item has a known probability

, and

evaluation of the sample population

review of audit work performed

the approximation of a random sampling approach

.