Probability proportional sampling method

PPS sampling is a statistical sampling method, which uses the principle of attribute sampling to draw the conclusion that the amount of money is not the occurrence rate.

PPS sampling takes monetary unit as sampling unit, which is sometimes called amount weighted sampling, monetary unit sampling, cumulative monetary amount sampling and comprehensive attribute variable sampling.

(B) PPS sampling must meet two conditions.

First, the overall false positive rate is very low (below 10%), and the overall scale is above 2000. This is the requirement of Poisson distribution used in PPS sampling.

Second, the misstatement of any item in the whole cannot exceed the book amount of the item. That is to say, if the book amount of an account is 100 yuan, its misstatement amount cannot exceed 100 yuan.

(C) Advantages of PPS sampling

1.PPS sampling is usually easier to use than traditional variable sampling.

2.PPS sampling can find a very small number of big false positives like looking for a needle in a haystack, because it decomposes a small number of large physical units into a large number of monetary units with smaller amounts, so that big items have more opportunities to be selected into the sample.

3. The sample size is 3. PPS sampling does not need to consider the expected variability of audit amount.

4. The probability that an item is selected in 4. PPS sampling is proportional to its monetary amount, so the generated samples will be stratified automatically.

If traditional variable sampling is used, certified public accountants usually need to stratify the population to reduce the sample size. In PPS sampling, if the project amount exceeds the sampling interval, PPS system sampling will automatically identify all single major projects.

5. If the expected misstatement of certified public accountants does not exist or is very small, the sample size of PPS sampling is usually smaller than the traditional variable sampling method.

6.PPS sampling samples are easier to design, and samples can be selected before obtaining the complete population.

(D) the shortcomings of PPS sampling

1.PPS sampling requires that the misstated amount of each physical unit in the population cannot exceed its book amount.

2. In PPS sampling, the underestimated physical unit is less likely to be selected.

PPS sampling is not suitable for testing underestimation.

If certified public accountants find underestimation in PPS samples, they need special consideration when evaluating samples.

3. The choice of zero balance or negative balance needs special consideration in the design.

4. When the total number of false positives increases, the sample size required for PPS sampling will also increase.

In these cases, the sample size of PPS sampling may be larger than that of traditional variable sampling.

5. When misstatement is found, if the risk level is determined, PPS sampling may overestimate the impact of sampling risk when evaluating samples, which may lead to the possibility that certified public accountants may reject an acceptable overall book amount.

6. In PPS sampling, certified public accountants usually need to accumulate the total amount one by one.