Form Boe-472 - Audit Sampling Plan printable pdf download

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

BETTY T. YEE

First District, San Francisco

SALES AND USE TAX DEPARTMENT

450 N STREET, SACRAMENTO, CALIFORNIA

SEN. GEORGE RUNNER (R

Second District, Lancaster

PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-00XX

1- 916-XXX-XXXX • FAX 1-916-XXX-XXXX

MICHELLE STEEL

Third District, Orange County

JEROME E. HORTON

Fourth District, Los Angeles

JOHN CHIANG

State Controller

_______

CYNTHIA BRIDGES

Executive Director

Use of Sampling in Auditing

The primary purpose behind the Board of Equalization’s (BOE) audit program is to determine, with the least possible

expenditure of time for both the taxpayer/feepayer and the BOE, the accuracy of reported amounts. Sampling serves to

accomplish this purpose.

Sampling is a process of drawing a conclusion about an entire body of information based on measurements of a representative

sample of that information. Sales and use taxes are transaction taxes, meaning that tax is determined on a

transaction-by-transaction basis. Therefore, verification must be done at the source document level. Since in many cases it is

economically impractical to audit all transactions, the BOE encourages the use of sampling whenever feasible.

There are generally two methods of sampling: judgment sampling and statistical sampling. A judgment sample includes all

samples obtained by non-statistical sampling methods. The most common type of judgment sample is the examination of a block

period of time (for example, day, week, month, or quarter). A statistical or random sample is a sample in which each item in the

population has an equal or known chance of being selected for examination. Examples of statistical or random sampling

techniques include unrestricted sampling, stratified sampling, systematic sampling with random start, and cluster sampling.

While judgment samples are not necessarily less accurate than statistical samples, there is no way of objectively evaluating the

accuracy or reliability of the test. The advantages of statistical sampling over non-statistical sampling are:

 It provides a selection process representative of the types of transactions involved and eliminates bias, since every item in

the population has an equal or known chance of being selected.

 It provides an advance estimate of the sample size required for a given objective.

 The results can be objectively evaluated.

 Multiple samples may be combined and evaluated.

 Properly conducted statistical sampling can yield more reliable results than judgment sampling.

 It is a method approved and recommended by the American Institute of Certified Public Accountants (AICPA).

Other factors to be considered in determining the best type of sample to conduct are the format, condition, storage, and

availability of business records. The auditor and taxpayer/feepayer should discuss the most beneficial approach to examining

source documents after the auditor has had an opportunity to review the business records but prior to the selection of the sample.

The attached BOE-472, Audit Sampling Plan, was developed to document the sampling plan and to set the criteria by which the

sample results will be evaluated. The purpose of this form is to obtain information regarding the taxpayer’s/feepayer’s operations

in order to establish the most effective and efficient means of developing a sampling plan. The form covers many common

situations that might arise in sampling which should be discussed with the taxpayer/feepayer. This form should be completed

with the assistance of the taxpayer/feepayer, prior to the selection of the sample.

The information and methods documented in this form are not binding for either the taxpayer/feepayer or BOE staff. The

sampling plan can, and should, be continually evaluated (and changed, if necessary) based upon information obtained during the

auditing process. In addition, it is possible that stratification or expansion of this sample may be necessary depending on the

results produced by this process. However, should any deviation to this plan be required, it will be fully discussed with the

taxpayer/feepayer and documented in the audit and on the sampling plan.

If you have any questions regarding this form and accompanying information, please contact your auditor.

BOE-472 REV. 8 (2-12)

Form Boe-472 - Audit Sampling Plan

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