Mich. Admin. Code 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 nonstatist ical sampling. The sampling
method shall be determined on a case-by-cas e basis. The audito r 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 sa mple in such a way that the auditors can
reasonably expect the sample to be representative of the re levant population and likely to
provide the auditors with a reasonable basis for conclusions about the population.
(3) Auditors must perform audit pro cedures, appropriate to the purpose, on each
item selected.
(4) Auditors must investigate the na ture 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-statistic al sampling of the audited
person’s books and records to provide suffici ent evidence to form a conclusion about the
correct tax liability. Non-statistical sa mpling includes judgmental samples, random
samples, simple random sampling, systema tic 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 st atistical 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 su fficient records or fails to provide records,
the auditor shall determine th e best information available and base the estimated tax
liability on that information.