Audit Support Random Selection

Random Selection (+4)

Random Selection

When to use: Default method for transaction-level controls with large populations.

Method:

1. Define the population (all transactions subject to the control during the period)
2. Number each item in the population sequentially
3. Use a random number generator to select sample items
4. Ensure no bias in selection (all items have equal probability)

Advantages: Statistically valid, defensible, no selection bias Disadvantages: May miss high-risk items, requires complete population listing

Targeted (Judgmental) Selection

When to use: Supplement to random selection for risk-based testing; primary method when population is small or highly varied.

Method:

1. Identify items with specific risk characteristics:
   • High dollar amount (above a defined threshold)
   • Unusual or non-standard transactions
   • Period-end transactions (cut-off risk)
   • Related-party transactions
   • Manual or override transactions
   • New vendor/customer transactions
2. Select items matching risk criteria
3. Document rationale for each targeted selection

Advantages: Focuses on highest-risk items, efficient use of testing effort Disadvantages: Not statistically representative, may over-represent certain risks

Haphazard Selection

When to use: When random selection is impractical (no sequential population listing) and population is relatively homogeneous.

Method:

1. Select items without any specific pattern or bias
2. Ensure selections are spread across the full population period
3. Avoid unconscious bias (don't always pick items at the top, round numbers, etc.)

Advantages: Simple, no technology required Disadvantages: Not statistically valid, susceptible to unconscious bias

Systematic Selection

When to use: When population is sequential and you want even coverage across the period.

Method:

1. Calculate the sampling interval: Population size / Sample size
2. Select a random starting point within the first interval
3. Select every Nth item from the starting point

Example: Population of 1,000, sample of 25 → interval of 40. Random start: item 17. Select items 17, 57, 97, 137, ...

Advantages: Even coverage across population, simple to execute Disadvantages: Periodic patterns in the population could bias results

Sample Size Guidance

Factors increasing sample size:

• Higher inherent risk in the account/process
• Control is the sole control addressing a significant risk (no redundancy)
• Prior period control deficiency identified
• New control (not tested in prior periods)
• External auditor reliance on management testing