Judgement sampling is where the auditor using his own experience and knowledge of the client's business and circumstances selects the sample to be tested without use of any mathematical or statistical tools. Statistical sampling is the drawing of inferences about a large volume of data by an examination of a sample using statistical methods in its selection.
The advantages of judgement sampling
a) The approach is well understood and has been refined by experience over many years;
b) The auditor is given an opportunity to bring his judgement and expertise into play. After all auditing is an exercise in professional judgement;
c) No special knowledge of statistics is required;
d) No time is wasted playing with mathematics;
Its disadvantages are
a) It is unscientific;
b) It is wasteful and usually too large samples are selected;
c) You cannot extrapolate the results to the population as a whole as the samples are not representative;
d) Personal bias in selecting the sample is unavoidable;
e) There is no logic to the selection of the sample or its size;
f) The sample selection is so erratic that it cannot be said to have applied to all items in the year;
g) the conclusions reached are usually vague.
Judgement sampling is still the preferred method by the majority of auditors and this is defended on the grounds that the auditor is weighing several pieces of evidence and is investigating several things at the same time that the whole process is too complex to be reduced to simple formulas.