Risk-Directed Selection
Definition
A judgmental sampling approach in which items are chosen because they exhibit specific risk indicators: unusual amounts, unusual payees, bypass of normal approval workflows, or patterns identified by data analytics. Not statistically projectable but essential when fraud is suspected in a defined transaction stream.
- Sampling type
- Judgmental, not statistical
- Selection triggers
- Unusual amounts, payees, or workflow bypass
- Statistical projectability
- None
- Typical use
- Suspected fraud in a defined transaction stream
Common questions
Why is risk-directed selection not suitable for estimating a total loss figure?+
Because items are deliberately chosen for their suspicious characteristics rather than at random, the sample is biased toward higher-risk transactions and cannot be statistically projected onto the full population to produce a defensible loss estimate.
When would an auditor prefer risk-directed selection over random statistical sampling?+
When the objective is detecting whether fraud has occurred at all, rather than estimating its overall extent, since targeting known risk indicators is far more likely to surface actual irregularities than a random sample of the same size.
Related terms
- Attribute Sampling
- A statistical sampling method that tests whether each selected item either has or lacks a specified attribute, for example whether a change...
- Confidence Level
- An explicit label attached to an attribution assessment indicating how strongly the available evidence supports the conclusion. Standard tiers are low, medium,...
- Monetary Unit Sampling (MUS)
- A probability-proportional-to-size method that treats each currency unit in the population as a sampling unit. Larger transactions have a higher probability of...
- Stratified Sampling
- A sampling design that divides the population into homogeneous subgroups (strata) and samples each stratum separately. Allows the auditor to apply higher...
- Tolerable Deviation Rate (TDR)
- The maximum rate of control deviations the auditor is willing to accept before concluding that a control cannot be relied upon. Setting...