SA 530 – Sample Selection Methods: Stratified, Block, Systematic/Interval

## SA 530: Sample Selection Methods

Once the auditor decides to use audit sampling, they must choose a method to select items. Different methods suit different audit objectives.

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### 1. Stratified Sampling

How it works:

• Divide the population into separate groups ('strata') based on a common characteristic (e.g., value range)
• Treat each stratum as a separate sub-population
• Select a sample from each stratum (often at different rates)

When to use: When the population is heterogeneous and higher-value items need more scrutiny.

Example: Trade receivables split into: >₹20L | ₹10–20L | <₹10L → different sample % from each group.

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### 2. Block (Cluster) Sampling

How it works:

• Select a contiguous block of items from the population
• E.g., first 200 invoices of the month, or 50 consecutive cheques

Limitation: Items within a block usually share similar characteristics; unusual or diverse transactions in other parts of the population are excluded. Provides a poor basis for opinion on the overall population.

When to use: Generally discouraged as a standalone method; acceptable only when the auditor has a specific reason to examine a particular period or sequence.

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### 3. Systematic (Interval) Sampling

How it works:

• Divide population size by sample size → sampling interval
• Select every n-th item starting from a random starting point

Formula: Sampling Interval = Population ÷ Sample Size

Example: 1,000 records ÷ 100 = interval of 10 → select records 1, 11, 21, 31…

Key precaution: Ensure the population is not structured so that the interval coincides with a recurring pattern (e.g., if every 10th transaction is a month-end journal, all selected items would be journal entries).

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### Comparison Table