CH218350 - How to do a compliance check: records: reviewing records: sampling techniques

When you have received the requested records, you will need to decide on the most effective way to review them.

If there are relatively few records you may decide to look at them all, but in many cases that will not be possible. You will therefore need to consider the best way of reviewing a sample. There are various techniques for doing this:

  • you could sample items
  • at regular intervals, for example, every fifth
  • by alphabet, for example, all customers with initials A-C or
  • by geographical spread, for example, all customers living in Surrey.

This will generally test a representative cross section. However, you will only be testing a small proportion of the total value.

  • you could sample by amount, for example all items over £250. This will ensure that although relatively few documents are seen you will cover a high proportion of the value. What is lost is the typical cross section of the business.
  • you could sample all invoices within a period of time. This will provide the complete picture during the chosen period, but the extent may be limited by the throughput of invoices. The accuracy of the sample will depend on how representative the period is. The proportion of total amount sampled will be relatively small.

Work out in advance exactly what you are looking for and decide on the approach appropriate to each set of records. Do not choose samples which are too large: you will only have a limited amount of time to spend on this task.

The areas where you suspect there may be potential risks will influence your choice. You will usually check the larger amounts or selected periods.

  • If you are looking for false purchase invoices, they are likely to be few in number and for middling amounts, to provide sufficient funds but minimise the risk of being found out.
  • If you think there may be regular evasion through, for example, the payment of family food bills, you should look at a complete sample for a period. This is because the extent of the evasion will depend upon an accumulation of relatively small amounts.
  • If you are trying to establish typical profit margins your selected period must be representative of the whole period you are checking.
  • You may wish to sample an unrepresentative period if you suspect it could provide a greater opportunity for evasion, for example, during a period of high sales when less care may have been taken with the book-keeping. Alternatively, if you suspect post or ante-dating you should sample the period where this could happen.

If you find something wrong, make sure that you have sufficient evidence. You may need to check a further sample or try to find similar examples from the rest of the records.

If you have found nothing, consider checking a further sample. If you are confident in the basis of your original choice of sample, then you should move on to check a different account.