What is non-sampling risk?
ISA 530.5(d) defines non-sampling risk as the risk that the auditor reaches an erroneous conclusion for any reason not related to sampling itself. ISA 530.A2 gives four examples, and each one shows up differently on an engagement.
The first is applying an inappropriate audit procedure. Testing revenue for completeness when the assertion at risk is occurrence does not produce useful evidence regardless of sample size. The procedure addresses the wrong direction.
The second is failing to recognise a misstatement in the items actually tested. An auditor who confirms a receivable balance and receives a reply showing a different amount but does not follow up on the difference has a non-sampling problem. The evidence was in hand. The error was in interpretation.
The third example in ISA 530.A2 is misinterpreting results. Projected misstatement below tolerable misstatement does not automatically mean the balance is acceptable if the nature of the errors found suggests a systematic problem rather than random occurrence. ISA 530.A22 requires qualitative evaluation alongside the quantitative comparison.
Non-sampling risk cannot be reduced by increasing the sample. It is reduced by designing appropriate procedures (ISA 330.7), training staff to recognise misstatements in the evidence they examine, supervising fieldwork adequately, and applying review under ISQM 1.
Key Points
- Non-sampling risk exists even when you test 100% of the population. Increasing sample size does not control it.
- ISA 530.A2 lists the causes: wrong procedure, wrong population, missed misstatement in items tested, misinterpreted results.
- Inspection findings that look like sampling failures are often non-sampling risk failures in disguise.
- Quality control, adequate training, proper supervision, and review are the controls. Bigger samples are not.
Why it matters in practice
The AFM's inspection reports consistently identify cases where audit teams performed the right procedure on the right population but failed to act on the results. An auditor who sends a confirmation and receives a response showing a EUR 60K difference but files it without investigation has a non-sampling risk failure. ISA 530.A2 covers this explicitly: failing to recognise a misstatement in the evidence examined.
Teams sometimes respond to a sampling-related inspection finding by increasing sample sizes on the next engagement. If the original finding was about how results were evaluated (not about sample size), the larger sample fixes nothing. ISA 530.A2 draws a clear line between the two risk types, and the response must match the actual cause.
Worked example: Gruner Einzelhandel AG
Client: Austrian retail chain, FY2024, revenue EUR 74M, Austrian UGB/IFRS reporter.
Population: 560 inventory line items totalling EUR 9.2M, tested for valuation (net realisable value).
Step 1 — Identify the non-sampling risk exposure: The engagement team is testing whether inventory is carried at the lower of cost and NRV (IAS 2.9). The primary non-sampling risk is failing to identify items where NRV is below cost, because the comparison requires judgment about expected selling prices and estimated costs to complete.
Step 2 — Design the procedure to address non-sampling risk: The team instructs staff to obtain actual post-year-end selling prices from the client's point-of-sale system for each sampled item and compare the selling price (net of completion costs) to the recorded cost. If no post-year-end sale exists, the team must obtain the most recent pre-year-end sale and adjust for known pricing changes.
Step 3 — Test and encounter an interpretation issue: Item #347 (winter coats, carrying amount EUR 41K) shows a post-year-end selling price of EUR 38K. The trainee records this as a EUR 3K write-down. The reviewer catches that the EUR 38K price is a promotional clearance price, and the standard retail price is EUR 45K. IAS 2.28 requires NRV to reflect the best estimate of the amount the inventories are expected to realise.
Conclusion: The write-down question for item #347 is a non-sampling risk issue, not a sampling issue. A larger sample would not have resolved the judgment about clearance pricing. Only adequate review and clear guidance on what NRV means in a retail context prevented the trainee's initial error from surviving into the final workpaper.
Key standard references
- ISA 530.5(d): Definition of non-sampling risk — the risk that the auditor reaches an erroneous conclusion for any reason not related to sampling.
- ISA 530.A2: Examples of non-sampling risk — inappropriate procedure, wrong population, failure to recognise misstatement, misinterpretation of results.
- ISA 530.A22: Qualitative evaluation of results alongside quantitative comparison to tolerable misstatement.
- ISA 330.7: Design of further audit procedures responsive to assessed risks — the primary control over non-sampling risk from inappropriate procedures.
Related terms
Related reading
Frequently asked questions
Does increasing the sample size reduce non-sampling risk?
No. Non-sampling risk exists even when you test 100% of the population. It is reduced by designing appropriate procedures, training staff, supervising fieldwork, and applying review.
What are common examples of non-sampling risk?
ISA 530.A2 lists four: applying an inappropriate procedure, failing to recognise a misstatement in items tested, misinterpreting results, and selecting the wrong population.