Final answer:
Sampling risk is the probability that an audit team's conclusion based on a sample is not representative of the entire population being audited. Chance error and bias contribute to sampling risk.
Step-by-step explanation:
In audit sampling applications, sampling risk is the probability that an audit team's conclusion based on a sample is not representative of the entire population being audited. Sampling risk arises due to the inherent variability in samples and can lead to incorrect conclusions about the population. It is influenced by two factors: chance error and bias.
Chance error refers to the possibility that a sample does not fairly represent the population due to its small size. To mitigate this risk, a larger sample should be used. On the other hand, bias occurs when a sample is not selected randomly, leading to an unfair representation of the population. Care should be taken to choose a randomized sample to reduce bias.