Use of Statistical Sampling Methods

Use of Statistical Sampling Methods:-


This is the most vital part of auditing. In fact this is the main part of auditing, as the audit programme is

no more than a plan of checking and audit working papers are the records of such checking. Traditionally, 

the operations of auditing are classified as casting, posting and vouching. Casting refers to arithmetical 

operations whereas posting refers to copying figure from one place to another. Vouching on the other 

hand is often described as “the backbone of auditing” and is most important operation. Vouching is the 

examination of entries in the books of accounts with reference to vouchers and supporting documentary 

evidence. The cost auditor, because of time constraints cannot examine each entry with the voucher and 

as such has to resort to test check which helps to form an opinion about the nature and quality of work 

and enables him to obtain definite basis for audit observations. The cost auditor also uses the following 

techniques in cost audit :

1. Flow charts
2. Statistical sampling
3. Ratio analysis


 Flow Charts:-

 Flow chart is chart or diagrammatic representation of fl ow of information etc. In auditing it is used

to diagrammatically represent the fl ow of information with the help of documents. It is useful to 

record the “decision” at different levels, the posting of data, and the recording of transactions on 

the document. It is customary to indicate the analysis of systems and documents in the fl ow chart 

detailed as under –

a) The number of copies of each document.
b) Its movements to different departments and sequence of such movements and where every
    copy is finally kept.
c) The operations like initialing, approving, etc. done on the documents in each department
    with brief description of the operations.
d) The collection from these documents into another register/documents as well as posting any
     information in the former from the latter by dotted line.

 This helps in identifying –

a) The division of responsibilities of the different departments.
b) The source of document whose error would be of far reaching consequences.
c) Possible clerical errors that can occur at each stage.
d) It gives a bird’s eye view of the system and an efficient documentation for the auditors testing                  it
e) It is the most efficient tool for doing actual analysis.

However, flow charts might not give the desired results as details are sometime omitted and the
individual charts are not properly cross referenced and indexed. Failure to standardize the symbols

and incomplete nature of the chart fails to give desired results.