By Christopher Haney, CPA, CFE, CHC
Forensus Group, LLC
Statistical sampling and extrapolation is an increasingly common practice in compliance auditing and litigation matters. Consequently, compliance officers and counsel should be aware of the techniques, strengths, and limitations of using sampling for the purposes of estimating valid and meaningful conclusions. This post provides an introduction to the steps involved in conducting defensible and meaningful statistical sampling analysis, along with a discussion of important terminology and considerations for interpreting sampling conclusions.
Introduction to Sampling
Sampling analysis is most commonly used when one seeks to infer useful information about a relatively large population without examining every unit in the population by examining only a subset of that population (i.e. a sample). As part of sampling analysis, estimation or extrapolation is a procedure by which measured characteristics of a sample yield estimates, inferentially, about unknown characteristics of the population from which the sample was drawn.
In a simple example, one might select a sample of students from a school, measure characteristics of those students such as grade point average, and then use this data – inferentially – to estimate (i.e. extrapolate) grade point averages among all students at the school, in general. Sampling methodologies are described at-length in textbooks, journals and various industry guidelines, and are capable of producing useful results when properly applied. [Read more…]