SAI India September 2011

 Sampling is used by SAI-India extensively in ◦ Financial Audit ◦ Compliance Audit ◦ Performance Audit

 Planning – selection of units for audit  Audit Execution – selection of transactions for detailed scrutiny ◦ Vouchers, contracts, pay bills/ pay bill items

 Stratification of population into ◦ High value transactions/ auditee units  These are generally covered 100 per cent  Such coverage facilitates providing necessary audit assurance ◦ Other transactions/ auditee units  Statistical sampling or  Non-statistical / judgemental sampling

 Statistical sampling ◦ Generally where transactions are computerised ◦ Simple Random Sampling/ Stratified Random Sampling/ Attribute Sampling/ Monetary Unit Sampling (MUS)/ multi-stage or cluster sampling  Non-statistical sampling ◦ Followed in majority of cases, where transactions are not computerised ◦ Judgement, based upon past experience, perception of effectiveness of internal controls, risk etc.

 To form an opinion on the population as a whole ◦ Scope for extrapolation of sample results across population ◦ Extensively used in audit of Central Government receipts  State Government receipts not computerised to the same extent ◦ Used to a lesser extent in audit of expenditure

 Simple Random Sampling ◦ Commonly used to select invoices, contracts, payroll items (computerised or manual) using random number table/ IDEA ◦ Results extrapolated only in qualitative terms  Not generally quantified  More commonly implemented as Stratified Random Sampling ◦ Also used for attribute sampling (especially for IT audits) in addition to variable sampling  E.g. has the payment been properly authorised or not?

 Stratify transactions into broad strata  Select all high value items – 100 per cent  Others selected at random from various strata with smaller value strata forming fewer samples

 100 per cent check of high value items & negative balance items  For other strata, different percentages of check (random selection), depending on monetary value ◦ Since there are a multiplicity of checks to be performed, we do not derive sample size based on targeted confidence levels (90/ 95 per cent)

 Probability of selection of an item is proportionate to its value (e.g. invoice/ contract value) ◦ Higher the contract value/ tax assessment, higher the probability of selection  Used in Central revenue audits, and other audits, involving computerised selection

 Traditionally used for “test check” purposes, where 100 per cent population cannot be analysed  Often implemented through selection of transactions for 2 months, out of the whole year’s transactions ◦ Generally, March is selected as one of the months  More transactions/ payment value  Higher risk  Tendency to exhaust budgetary appropriations before lapse  Adjustment entries before closure of accounts

 Multi-stage/ cluster sampling approach adopted ◦ State/ Province ◦ District ◦ Block/ Mandal ◦ Gram Panchayat/ Other Unit ◦ Works/ Transactions

 State of Andhra Pradesh  One component – Medical Infrastructure ◦ Lowest level – sub-centres  Population of 2,000/ 3,000 ◦ Primary Health Centres (PHCs)  Population of 20,000 ◦ Community Health Centres  Population of 80,000 ◦ District Hospitals ◦ Speciality Hospitals

 Audit focus ◦ Health Centres infrastructure – existence, usability  Ambulance  Electricity / Stand-by Power Supply  Water Supply + Water storage  Separate wards and toilets for male and female patients  Waiting rooms  Telephone  Accommodation for staff/ attendants  Other rooms (In-Patient/ Out-Patient Areas, Operation Theatres, Labour (Gynaec) Room etc.) as prescribed for each level  Equipment for OT

◦ Medicines  Adequate stock of prescribed medicines at each level  Cold chain ◦ Manpower  Doctors (lady doctors separately), nurses, helpers ◦ Patient-bed ratio ◦ Laboratory services (diagnostic + radiological services) ◦ Emergency services

 State Level – Policy & Planning  District Level ◦ Judgemental selection  Most backward and most forward districts (based on HDI)  Expenditure incurred on medical health  Risk perception  Complaints, media reports, past ARs etc.  Regional balance within State

 Within district ◦ 1/3 of Community Health Centres  Judgemental/ random selection  Under CHCs ◦ 1/3 of PHCs  Judgemental/ Random selection  Under PHCs ◦ 1/3 of SCs  Random selection

 Quantitative extrapolation across entire population not done  Percentage of sample not conforming to requirements (e.g. prescribed medical infrastructure parameters) indicated  No attempt to project sample results across the larger population  Multiplicity of parameters  Unlike receipt audit (under-assessment/ over-assessment of tax on a case)