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Stratification is the process of dividing a population into subpopulations, each of which is a group of sampling units which have similar characteristics (often monetary value).
In considering the characteristics of the population from which the sample will be drawn. It provides guidance to the auditor on the use of stratification
1. Audit efficiency may be improved if the auditor stratifies a population by
dividing it into discrete sub-populations which have an identifying
characteristic. The objective of stratification is to reduce the variability of items
within each stratum and therefore allow sample size to be reduced without
increasing sampling risk.
2. When performing tests of details, the population is often stratified by
monetary value. This allows greater audit effort to be directed to the larger
value items, as these items may contain the greatest potential misstatement
in terms of overstatement. Similarly, a population may be stratified
according to a particular characteristic that indicates a higher risk of
misstatement, for example, when testing the allowance for doubtful accounts
in the valuation of accounts receivable, balances may be stratified by age.
It could be related to my answer in a previois question about the sampling risk which states that
Sampling Risk is the risk that the auditor could select inappropriate sample in his audit process. The major problem is the sampling techniques that the auditor always use which is using random and selective sample that should be suitable. And increasing later the sample is connected finding more mistakes that r4quire increasing the sampling. The major risk that this sample could not a suitable one.
Stratification is a technique used in audit sampling to ensure that accounts with the largest monetary amounts will be selected in the sampling process. Individual accounts are 'grouped' or 'stratified' based on their monetary amounts.
