Discovery sampling

Discovery sampling is a statistical auditing technique used to detect the presence of a specific characteristic or attribute within a population, especially when the occurrence rate is expected to be very low. Here are the key points about discovery sampling:

Purpose: The main goal is to identify whether at least one instance of the characteristic or attribute exists in the population. This method is particularly useful for detecting rare events, such as fraud or errors

Process:

• Define Objective: Determine what you are trying to discover (e.g., unauthorized transactions).
• Set Parameters: Establish the tolerable error rate (often set to 0% for critical issues) and the confidence level (e.g., 95% confidence that the sample will include at least one instance if it exists).
• Sample Size: Calculate the sample size needed based on statistical tables or software.
• Evaluate Sample: Examine the selected sample for the characteristic or attribute in question.
• Applications: Discovery sampling is commonly used in auditing to detect fraud, errors, or irregularities in financial records. For example, an auditor might use this method to check for unauthorized payments in a company's accounts payable process.

Advantages:

• Efficiency: Allows auditors to focus on finding critical issues without examining the entire population
• Effectiveness: Even a single instance found can be significant and warrant further investigation