Population

In Statistics, a population is defined as an aggregate or totality of units of interest or objects, whether

animate or inanimate, concrete or abstract, A statistical population consists of all measurements or counts of
a variable. A population can be either finite or infinite depending upon whether it contains a countable or an
uncountable number of units. The size of a finite population is usually denoted by the letter N.

A numerical quantity used to describe the characteristics of a population is called a parameter.

Example 1: Population in Accounting In accounting,

A population could refer to all the financial transactions recorded within a company's books during a year.
Each transaction, such as sales, expenses, or investments, represents a unit within the population.
Parameters related to this population could include the total revenue, total expenses, or net profit of the
company for that period.

Example 2: Population in Finance In finance,

A population might represent all the stock prices of a particular stock exchange over a given period. This
could include every recorded price movement, from opening to closing prices, for each trading day.
Analyzing this population could help investors understand patterns, trends, and volatility in the market,
which is crucial for making informed investment decisions.

Sample

A sample is a part of a population, selected for study. The number of units included in the sample is called
the size of the sample and is denoted by the letter n. Samples are selected from population to provide
estimates of population parameters. One cannot obtain valid conclusions if the sample is not representative
of the population.

A Statistic is a numerical descriptive measure computed from a sample.

The procedure of selecting a sample from the population is called sampling.

Sampling allows researchers to use a small group from a larger population to make observations and
determinations. Sampling is a statistical technique which is used in almost every field in order to collect
information and on the basis of this information inferences about the characteristics of a population are
made.
Accounting: Suppose a company wants to estimate the average monthly expenses of its employees. They
might select a sample of 100 employees from their entire workforce and calculate the average monthly
expenses based on their expenditure records.

Finance: Consider an investment firm analyzing the returns of a particular mutual fund over the past year.
Instead of examining every investor's return, the firm selects a sample of 200 investors who have invested in
the fund and calculates the average return for this sample.

When to use population and sample?

The population is used to collect similar kinds of data so that we can use these data whenever needed by
drawing them into samples. Moreover, When population sizes are too big for the test to include all potential
participants or observations, samples are utilized in statistical analysis.

Difference between population and sample

population sample
A population dataset is a collection of similar A sample dataset is one or more observations deployed
kinds of data. from the population.

The process of data collection in a population is The process of interested data deployed from the
known as the census. population is known as sampling.

The measurable characteristic of the population The measurable characteristic of the sample is called a
is called a parameter. statistic.

We can say the population consists of different While the sample is a subset of the population.
samples.
Example: sample of managers in a company.
For example; the population of employees in a
company

The two basic purposes of sampling are

(i) to provide sufficient information about the characteristics of a population without examining every unit
of the population, and

(ii) to find the reliability of the estimates derived from the sample. We find the reliability by computing the
standard error of a statistic and if possible, its exact sampling distribution.
 Advantages of Sampling

 Sampling saves money as it is much cheaper to collect the desired information from small sample
than from the whole population.
 Sampling saves a lot of time and energy as the needed data are collected much faster than census
information.
 Sampling provides information that is almost as accurate as that obtained from a complete census.
 Sampling makes it possible to obtain more detailed information from each unit of the sample.
 Sampling has much smaller "non-response". The term non-response means the non- availability of
information from some sampling units included in sample for any reason such as failure to locate or
measure some of the units, refusals, not-at-home, etc.

Sample Design and Sample Survey

A sample design is a definite statistical plan concerned with all principal steps taken in the selection of a
sample and the estimation procedure. These steps are formulated in advance of conducting the sample. A
sample design is a set of decisions (design parameters) about what and how much data to collect, and when
(how often, for how long) and where to collect it.

Examples:

 Auditors often use statistical sampling techniques to select a subset of financial transactions, rather
than examining each item in the population. The sample design involves determining the appropriate
sampling method and sample size based on factors such as risk assessment, materiality, and desired
confidence level.
 Evaluating customer preferences for investment, sample design is crucial. Researchers may use
various sampling techniques to ensure the sample is representative of the target population, which
could include demographics such as age, income, geographic location, and investment experience.

The term survey has been defined as a means of collecting information to meet a definite need. When a
survey is carried out by a sampling method, it is called a sample survey. A sample survey is a survey which
is carried out using a sampling method, i.e. in which a portion only, not the whole population is surveyed.

Examples:

 Auditors may conduct a sample survey to test the effectiveness of internal controls over financial
reporting.
  Researchers might conduct a survey to gather data on customer preferences for a new financial
service.

The main steps in a sample survey are to:

(i) clearly state the objectives of the survey;

(ii) define the population we wish to study as clearly as possible;

(iii) construct the sampling frame by clearly defining the sampling units;

(iv) choose an appropriate sample design and proper sample size;

(v) organize a reliable field, work to achieve the objectives of the survey;

(vi) summarize and analyse the data.

Sampling Frame

A list of elements in the population that is used to select a sample, is called sampling frame. A sampling
frame is a complete list or a map that contains all the N sampling units in a population.

Examples:

1. when conducting a study on financial performance, the sampling frame could be a comprehensive
list of all registered companies This list include information such as company name, registration
number, and other relevant details necessary for sampling purposes.

2. Research related to stock market analysis or investment strategies, the sampling frame could consist
of a database containing information on all the companies listed on a particular stock exchange. This
database would include details about financial metrics necessary for selecting a sample of
companies.

The requirements of a reasonably good frame are that the frame should

(i) not contain inaccurate sampling units,

(ii) be complete and exhaustive, i.e. should contain a!! units and should cover the whole of the population,

(iii) be free from errors of omission and duplication of sampling units; and

(iv) be as up-to-date as possible at the time of use.

Most of the frames used for sample surveys do not meet all these requirements.
 Probability and Non-probability Sampling

When each unit in a population has a known non- zero (not necessarily equal) probability included in the
sample, the sampling is said to be probability sampling. A probability sampling is also called random
sampling. The major types of probability sampling are Simple random sampling, Stratified random
sampling, Systematic sampling, Cluster sampling, etc.

Examples:

1. When auditors conduct financial audits, they might use stratified sampling to ensure representation
from different segments of the population.

2. A financial institution conducting a survey to understand customer satisfaction they might use
simple random sampling, where each customer has an equal chance of being selected.

A non-probability sampling, also called non-random sampling, is a process in which the personal
judgment determines which units of the population are selected for a sample.

Non-probability sampling techniques include Purposive sampling and Quota sampling.

Examples:

 In auditing, cluster sampling can be used in studying the investment of individuals, they might
divide the population into income brackets such as low-income, middle-income, and high-income
earners.
 In finance, cluster sampling can be utilized in market research to study companies behavior or
preferences. They might set quotas based on factors like annual revenue or number of employees.

Sampling With and Without Replacement

A method of sampling where an item may be sampled more than once. Sampling with replacement
generally produces independent events.

Examples:

 In accounting, when a company uses the FIFO or LIFO methods to value its inventory, sampling
with replacement can be used to simulate inventory movements for cost flow assumptions.
 In finance, particularly in risk management and option pricing , Sampling with replacement is often
utilized to model asset price movements over time.
A method of sampling where an item may not be sampled more than once. Sampling without replacement
generally produces dependent events.

Examples:

 Auditors select a sample of transactions for testing, they typically use sampling without replacement
to ensure that each selected item is only tested once.
 When conducting portfolio analysis, financial analysts may use sampling without replacement to
select a subset of assets from a larger portfolio for evaluation.

Sampling and Non Sampling Errors

Sampling errors are statistical errors that arise when a sample does not represent the whole population.

Examples:

 When auditors select a sample of transactions or accounts to examine rather than reviewing every
single transaction or account in a financial statement audit, sampling error can occur.
 In finance, when conducting market research to gauge investor sentiment or forecast market trends,
sampling error can arise if the sample of investors surveyed is not truly representative of the entire
investor population

An error occurs due to sources other than sampling, while conducting survey activities is known as non
sampling error.

Examples:

 Non-sampling errors in accounting can occur due to mistakes made during the data entry process.
 When conducting surveys to gather data on investor sentiment, non-sampling errors such as response
bias can occur.

Sampling Bias

In survey sampling, the word bias means a systematic component of error which deprives a survey result of
its representativeness. Bias is different from a random error in the sense that the random errors balance out
in the long run while bias is cumulative and does not become less as the sample size increases

Examples:

 When conducting financial statement analysis, if an analyst only selects companies from a certain
industry or size range for comparison, it may introduce sampling bias.
  In finance, particularly in market research or investment analysis, convenience sampling bias can
occur. This happens when researchers or analysts select samples based on convenience rather than
representativeness.

SIMPLE RANDOM SAMPLES

Simple Random Sample. A sample is defined to be a simple random sample (SRS) if it is selected in such
a manner that (i) each unit in the population has an equal probability of being included in the sample and (ii)
each possible sample of the same size has an equal probability of being the sample selected.

A simple random sample is also known as unrestricted random sample. An important advantage of simple
random sampling is that it provides unbiased estimates of the population mean, population totals and of
sampling variance of the estimates.

Examples:

 A company's auditors may use simple random sampling to select a sample of transactions or records
to examine during an audit.
 A finance company may use simple random sampling to select a sample of individuals from a target
market to survey about their investment preferences or attitudes towards financial products.

Selection of Simple Random Sample. A simple random sample can be selected by the following methods:

1. Goldfish Bowl Procedure:

 Give each thing or person in the group a number, like 1, 2, 3, and so on.

 Write these numbers on cards or pieces of paper.

 Put all the cards or papers in a bowl and mix them up well.

 Close your eyes and pick out the number of cards you need for your sample.

 Whatever numbers you pick, those things or people are in your sample.

2. Using a Random Number Table:

 Give each thing or person in the group a number, like before.

 Look at a table of random numbers and pick a starting point randomly.

 Then, read numbers from the table in pairs, threes, or however many you need.
  If a number is bigger than the total number of things or people, or if you've already used it,
skip it.

 Keep doing this until you have enough numbers for your sample.

3. Using a Computer:

 There are programs on computers that can give you random numbers.

 Each number corresponds to something in your group.

 Include the things or people that match the random numbers in your sample.

Stratified Random Sample

A sample of size n is defined to be a stratified rundom sample if it is selected from a population which has
been divided into a number of non-overlapping groups or sub- populations, called strata.

Examples:

 In financial reporting analysis, companies often need to assess the accuracy of their financial
statements. They may use a stratified random sample to select a subset of transactions or accounts
from various segments of the business.
 Investment firms may conduct market research to gather data on investor preferences, risk appetites,
and investment strategies. They might stratify their sample based on demographic factors such as
age, income level, and investment experience.

Cluster Sample

Cluster sampling is a probability sampling technique where researchers divide the population into multiple
groups (clusters) for research.

A random sample is said to be a cluster sample if it consists of first selecting at random groups of individual
units, called clusters (treated as sampling units) into which a population can be divided .

.Examples:

 In auditing, cluster sampling can be used in studying the investment of individuals, they might
divide the population into income brackets such as low-income, middle-income, and high-income
earners.
 In finance, cluster sampling can be utilized in market research to study companies behavior or
preferences. They might set quotas based on factors like annual revenue or number of employees.