Attribute sampling is a statistical sampling method used in auditing and quality control to test the presence or absence of specific characteristics or attributes in a population. It is a widely used technique in compliance testing, internal controls assessment, and other areas where auditors need to evaluate whether certain requirements or procedures are being met.
In attribute sampling, a sample of items is selected from a larger population, and each item is then examined to determine whether it possesses the desired attribute or not. The results of the sample are used to estimate the proportion of items in the entire population that possess the attribute. This helps auditors make informed decisions about the effectiveness of internal controls or compliance with regulations.
For example, an auditor may use attribute sampling to test the accuracy of a company’s sales invoices. The auditor would select a random sample of sales invoices from the population and check each invoice for errors, such as incorrect pricing or incorrect customer information. Based on the results of the sample, the auditor would estimate the percentage of errors in the entire population of sales invoices and determine whether the error rate is acceptable or if further action is needed.
Example of Attribute Sampling
Let’s consider an example of attribute sampling in the context of a company’s payroll process.
Company ABC has 1,000 employees, and management wants to assess the effectiveness of its payroll process in terms of ensuring that the employees are paid accurately and on time. To do this, the company decides to use attribute sampling to test a sample of payroll records.
First, the company selects a random sample of 100 payroll records from the population of 1,000 records. The desired attributes being tested are:
- The employee’s pay rate is accurate and matches the approved pay rate in their personnel file.
- The employee’s hours worked are accurately recorded and match the timesheet records.
- The payroll tax deductions are calculated correctly based on the employee’s tax bracket and exemptions.
- The employee’s pay is processed on time and deposited into their bank account according to the payroll schedule.
Next, the company reviews each of the 100 sampled payroll records to determine if they possess these desired attributes. Suppose the results of the review are as follows:
- 98 payroll records have accurate pay rates.
- 95 payroll records have accurate hours worked.
- 97 payroll records have correct payroll tax deductions.
- 99 payroll records were processed and deposited on time.
Based on the sample results, the company can estimate the proportion of payroll records in the entire population that possess the desired attributes:
- Pay rate accuracy: 98% (98/100)
- Hours worked accuracy: 95% (95/100)
- Payroll tax deductions accuracy: 97% (97/100)
- Timeliness of payroll processing: 99% (99/100)
The company can then use these estimates to assess the effectiveness of its payroll process and decide if any further actions are needed to improve the process or address any identified issues.