This definition is important in the selection of

This definition is important in the selection of audit procedures. Some audit procedures are not sampling by this
definition, including the following:
± Application of an audit procedure limited to a specific group of items within a balance or class of
transactions that have a distinct characteristic, such as all fixed asset additions over $5,000.
± Examining a few transactions within a balance or class of transactions to obtain an understanding of the
nature of the client’s activities.
± Applying an audit procedure to a few transactions to clarify the understanding of the design of the
organization’s internal control.
The important difference in these three examples is that the purpose of the test is not to reach a conclusion that
applies to the entire balance or class of transactions. In each of these cases, authoritative pronouncements on
sampling would not apply to the test performed.
The definition of audit sampling allows some alternatives to sampling in deciding the extent of procedures. This is
important since it may allow the auditor to apply procedures in a more efficient manner. If audit sampling is used,
SAS No.Ă39 (AU 350) imposes certain requirements. The key to distinguishing audit sampling from other audit
approaches for the types of audit tests that might possibly involve sampling is any test that involves application of
procedures to less than 100 percent of the items in the population but that does not involve projecting the results
to the entire account balance or class of transactions is not audit sampling. However, the auditor cannot ignore the
requirements of SAS No.Ă39 (AU 350) by arbitrarily failing to project the results of a sample.
Thus, when the auditor evaluates some aspect of an entire account balance or transaction class on the basis of
examining less than 100% of the population, the auditor must follow the requirements of SAS No.Ă39 and project the
test results.
Relation of Types of Audit Procedures to Audit Sampling
In a nonprofit organization engagement, four distinct types of audit procedures may involve the use of audit
sampling as follows:
± Substantive tests of details of account balances.
± Substantive tests of details of transactions.
± Tests of controls directed toward operating effectiveness.
± Tests of compliance with laws and regulations.
Exhibit 2Ć1 presents common examples of audit sampling applications for these types of audit procedures. The
examples in Exhibit 2Ć1 assume the auditor has decided that sampling is necessary. In some cases, the auditor may
be able to design an efficient and effective approach without sampling.

NPOT10
Companion to PPC’s Guide to Audits of Nonprofit Organizations
213
Exhibit 2Ć1
Audit Sampling Applications
Type of Audit Procedures
Common Examples in Nonprofit
Organization Engagements
Substantive Tests of Account Balances ± Confirmation of service fee receivables.