What is 'Sampling'

Sampling is a process used in statistical analysis in which a predetermined

number of observations are taken from a larger population. The methodology
used to sample from a larger population depends on the type of analysis being
performed, but may include simple random sampling or systematic sampling.

In business, a CPA performing an audit uses sampling to determine the accuracy

of account balances in the financial statements, and managers use sampling to
assess the success of the firms marketing efforts.

BREAKING DOWN 'Sampling'

The sample should be a representation of the entire population. When taking a
sample from a larger population, it is important to consider how the sample is
chosen. To get a representative sample, the sample must be drawn randomly
and encompass the whole population. For example, a lottery system could be
used to determine the average age of students in a university by sampling 10%
of the student body.
Factoring in Systematic Sampling
Systematic sampling uses a random starting point and a periodic interval to
select items for a sample. The sampling interval is calculated as the population
size divided by the sample size. Assume, for example, that a CPA is auditing the
internal controls related to the cash account and wants to test the company
policy that checks over $10,000 must be signed by two people, rather than just
one person.

The accountant's population is every company check written is excess of

$10,000 during the fiscal year, which is 300 total checks in this example. The
CPA firm uses probability statistics and determines that the sample size should
be 20% of the population, or 60 checks. The sampling interval is 300 checks
divided by 60 sample checks, or five, so the CPA selects every fifth check for
testing. Assume that, if no errors are found in the sampling test work, the
statistical analysis gives the CPA a 95% confidence rate that the check
procedure was performed correctly. The CPA performs the sample test work on
60 checks and does not find any errors, and the accountant concludes that the
internal control over cash is working properly.