Applicability of Statistical Sampling Techniques to the Confirmation of Accounts Receivable.

Abstract The purpose of this study was to investigate the applicability of statistical sampling techniques to the confirmation of accounts receivable. The confirmations of accounts receivable by a firm of independent auditors in three companies-two industrial ones and a public utility were investigated. These companies were chosen to provide a variety of situations as to type of business, problems encountered in confirmations, etc. Nevertheless, three companies constitute a very small sample, and this fact must be borne in mind in evaluating the findings. There are several important implications in the use of sampling by the auditor. In the first place, the auditor's purpose in using confirmations of a sample of accounts cannot be to make all adjustments in the accounts, which are necessary. That could be done only by a complete examination, not on the basis of a sample. In the second place, it cannot be the purpose of an auditor in confirming a sample of account balances solely to reconcile and make adjustments where necessary in those accounts, which happen to fall into the sample. If that were the purpose, the auditor would be ignoring completely all accounts not in the sample. Rather, a sample of accounts is confirmed to provide the auditor with a picture of certain characteristics of all accounts or of the accounting process, as revealed by confirmations.