What is judgmental sampling in auditing?

Judgmental sampling in auditing is a method where the auditor selects items based on their professional judgment rather than using random selection or predetermined criteria. This approach allows the auditor to focus on specific areas of concern or items that may present higher risks, based on their expertise and understanding of the client's business, operations, and internal controls.

Using professional judgment enables auditors to consider factors such as materiality, complexity, or the likelihood of misstatements when choosing which items to sample. This can be particularly useful in situations where the population is heterogeneous and where certain items may be of greater interest for examination due to their significance or risk profile. It adds a tailored, rather than a generic, perspective to the audit process.

In contrast, other sampling methods do not rely on the auditor's discretion in the same way. Random selection does not take into account the specifics of the items, while using a formula imposes a systematic approach that may not consider relevant risks. Focusing only on high-value items can lead to overlooking smaller but potentially significant discrepancies. Hence, judgmental sampling allows for a more nuanced approach to identifying and assessing the risks pertinent to the audit at hand.