Importance Of Sampling And Its Effect On Financial Statements

729 Words Apr 5th, 2015 3 Pages
History

Sampling is regarded as one of the most necessary parts of auditing today, but as a matter of fact, it was not until 1997 that the “Audit Sampling” standard was issued by the International Auditing and Assurance Standards Board (IAASB). When auditing first came into fruition sampling was not given the same consideration that is has today, as company owners were “interested in discovering major accounts of fraud or misstatements in the financial statements” (Oana, Tatiana 2013, and expected 100% assurance. This resulted in a need to test and verify all elements of a class of transactions or account balance, over the course of the audited period. This practice would only be able to last so long, as the global rise of computers and databases would create more documentation for companies, making it impossible to audit with the previous amount of assurance as in the past.

Sampling was discussed prior to the emergence of computers, first by Lawrence R. Dicksee. In 1907 Dicksee brought up the issue of what an effective audit consisted of. He argued that auditing with 100% assurance was only needed depending on the extent of internal controls that the company possessed. However, in 1917 the Federal Reserve Bulletin emphasized what Dicksee had stated by printing a set of audit procedures that mentioned sampling, as “the selection of some inventory items” (Oana, Tatiana 2013). In 1929 the American Institute of Certified Public Accountants (AICPA) would publish a set of…

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