R 205.2009 Field audit sampling and sampling projections.

Rule 9. (1) When designing an audit sample, auditors must consider the purpose of the audit procedure and the characteristics of the population from which the sample will be drawn. The auditor may use statistical or nonstatistical sampling. The sampling method shall be determined on a case-by-case basis. The auditor may consider the circumstances of the audit, the type of taxpayer entity, and the taxpayer’s internal control system. (2) Auditors must select items for the sample in such a way that the auditors can reasonably expect the sample to be representative of the relevant population and likely to provide the auditors with a reasonable basis for conclusions about the population. (3) Auditors must perform audit procedures, appropriate to the purpose, on each item selected. (4) Auditors must investigate the nature and causes of any deviations or misstatements identified and evaluate their possible effect on the purpose of the audit procedure and on other areas of the audit. (5) Auditors must project the results of audit sampling to the population. (6) Auditors may use either statistical or non-statistical sampling of the audited person’s books and records to provide sufficient evidence to form a conclusion about the correct tax liability. Non-statistical sampling includes judgmental samples, random samples, simple random sampling, systematic sampling, and cluster sampling or any other sampling method that does not involve statistical evaluation. (7) Whenever 2 or more accounting populations for a particular tax return are combined and examined with the aid of a statistical sample, the sample result can be combined according to the rules for a stratified sample. (8) When sampling the same accounts for multiple years, the auditor may combine the accounts into 1 population. The result must be projected by a reasonable method that the auditor determines prior to selecting the sampling units. (9) If an audited person does not have sufficient records or fails to provide records, the auditor shall determine the best information available and base the estimated tax liability on that information.