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 firm’s 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.
Examples of Sample Tests for Marketing
Every business attempts to sell a product or service to a market niche. A company samples individuals in a particular market niche to find out what they need and what problems they want to solve. The results of the sample help the business serve the needs of people in the market niche.