Financial Statements - Optimizing financial audit
The advantages of a statistical sample
The challenge financial audit is facing is to deliver high(er) quality with less man hours. The use of statistical sampling allows to give an unqualified opinion for the financial statements with minimal effort. Statistical sampling also provides a sound base for the identification of risks and therefore optimizes prioritization of audit work streams.
If a sample contains errors, a quantifiable result in terms of precision and reliability can be quickly obtained. One of the great advantages of sampling is that both expected and non- expected errors can be identified.
Statistical sampling method
Verifying the correctness of costs is part of an annual audit. The sample is designed with a confidence of 95% and a precision (materiality) of 1% of the total volume of expenditures.
These parameters determine the sample size regarding the total expenditures at 300 (monetary) units. The sample on costs is a proportionate part of this 300. If the sample contains no error, the maximum error in the costs is equal to the initial precision. In addition, other applications of statistical sampling are also possible.