Non-statistical sampling Describe non-statistical sampling for test of account balances and how it is used by the auditor

Nonstatistical samples should be based on the same audit considerations as those used for statistical sampling. There is no way to mathematically control for and measure sampling risk in a nonstatistical sample; the auditor can project only the detected misstatements and make a judgment as to whether the account is likely to be materially misstated, and then decide whether more audit work is needed.
In determining sample size, all significant items should be tested. The auditor should select all items over a specific dollar amount, and then, depending on audit objectives, select items with other characteristics, such as items billed in the last week or billed to specific parties. The sample size of the other items to be tested should be based on the same factors used in statistical sampling. In terms of selecting the sample, the auditor should take steps to increase the likelihood that the sample is representative of the population. The auditor may obtain a representative sample using a random based method or haphazard sampling.
The auditor then has to evaluate the sample results. While statistical sampling methods automatically builds in an allowance for sampling risk given the defined parameters provided by the auditor, now the auditor has to judgmentally consider that allowance.
For example, using the example provided in the text, a misstatement of $900 out of a sample of $310,000 given a population of $2,500,000 results in a projected error of $7,258.
$900/$310,000 × $2,500,000 = $7,258
If tolerable misstatement is $8,000, even though the projected misstatement is less than tolerable misstatement the auditor may still reject the account balance as being materially misstated. However, if tolerable misstatement is $15,000 then the auditor may very well be willing to accept the account balance as not being materially misstated. The point is that now the auditor has to judgmentally evaluate the point at which he would be satisfied to sign off on the appropriateness of the account balance.