Sampling Risk vs. Nonsampling Risk

Sampling risk and nonsampling risk both involve the auditor making an incorrect decision.

Sampling risk is the risk that the sample will not be truly representative of the population. This could result in a Type 1 error (the auditor concludes that the internal controls are ineffective, when they are not, or the auditor concludes that an account balance is materially misstated when it is not) or a Type 2 error (the auditor concludes that the internal controls are effective, when they are not, or the auditor concludes that an account balance is not materially misstated, when it is).

Nonsampling risk is the risk that the auditor will reach the wrong conclusion for reasons that have nothing to do with sampling. For example, the auditor might use the wrong audit procedure, make a calculation error, or fail to interpret the audit evidence correctly.

Sampling risk can be quantified, but nonsampling risk cannot.—
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