1:1 The Audit Process 3

Question 1

What does it mean by homogenous population?

Answer 1

Is it just one population or is there multiple populations?

Question 2

How to determine sample size?

Answer 2

Confidence level
Tolerable Error Rare (T.E.R)
Estimate of the Actual Error Rate (A.E.R)

Question 3

Determining the sample size for compliance testing

Answer 3

If A.E.R >T.E.R then the reliance placed on the system is reduced

If A.E.R

Question 4

What is Attribute sampling?

Answer 4

This is where characteristics of a population are being tested

Confidence level and T.E.R have a great effect on the sample size

Question 5

What is Monetary unit sampling?

Answer 5

Used to quantify the £/$ error in the population

Useful when population is in £/$ terms and a cumulative total is available

Question 6

Advantages and disadvantages of Monetary unit sampling

Answer 6

+ The probability of an item being selected is proportional to its size
+ Well established and straightforward method

• For theoretical reason it should not be used on anything other than a perfect population
• In practice, it is used even with a low error rate

Question 7

What are the 3 methods of variables sampling?

Answer 7

Mean per unit
Difference estimation
Ratio Estimation

Question 8

What is the process of Difference estimation

Answer 8

BV of sample - Audited value of sample = X
ΣX / No. of items in sample = mean difference
Mean diff x no of items in pop = estimation of pop diff
ΣBV + estimation of pop diff = audited value

Question 9

How is the ratio estimation calculated?

Answer 9

(Σ value in sample/Σ BV of sample) x Σ BV of population = Estimated audited value

Question 10

Disadvantage of variable sampling

Answer 10

Assumes that the population is normally distributed but this may not be so.