Statistical Sampling and Independent Auditing
by OSCAR S. GELLEIN Partner, Executive Office
Presented before a joint meeting of the Colorado
and Wyoming Societies of Certified Public
Accountants, Boulder, Colorado—May 1961
HERE IN THE SHADE of the towering Flat Irons and at the edge of the immeasurable Rockies it should be easy to get into the spirit of thinking about quantity or size. Today I propose to consider the quantity of our work; I prefer to think of it as the quality of quantity. How do we decide on the right amount of audit work? Other professional
men probably are not as concerned with quantity as we are.
The lawyer often, I am sure, asks himself: Have I sought the best remedy for my client? Have I found the right precedents, the right arguments, the best way to present them? Occasionally, he asks himself: Have I found enough precedents? But the number is not as critical as the kind.
The physician is keenly concerned with the diagnosis and often asks himself: Have I made the right tests at the right time? He doesn't often ask himself: Have I made the right number of tests? Have I taken enough blood to make a satisfactory test? The amount of blood that he takes generally just doesn't make any difference as long as he has the minimum amount required to make up the slides and the like. An important exception, of course, relates to medical research, such as occurred in establishing the effectiveness of the Salk serum.
The auditor, however, has to answer two questions in almost every engagement, both of which are critical. Have I applied the right procedures? Have I applied them to enough items to obtain the desired satisfaction? Quality and number are critical. The number
of items to be tested is critical from both directions. Too few means that the basis of our opinion may be inadequate. Too many means that the economics of our practice is upset. It means further, and more importantly, that the auditor would be charging for work that does not add significantly to the satisfaction that he needs for his opinion.
Things have been stirring over the years in shaping the principles that underlie the financial statements and in selecting the procedures to be applied in gaining audit satisfaction.