14. Evidence - Sampling Flashcards
How is the sample deviation rate determined?
The number of deviations observed in an attribute sampling application is divided by the sample size.
What does stratifying a population mean?
It means dividing it into sub-populations, allowing the application of different sampling techniques to each sub-population or stratum.
When does over-reliance occur?
If the sample has fewer observed deviations than the true deviation rate in the pollution.
What is attribute sampling best used for?
To test the effectiveness of internal controls because it can estimate the rate of control deviations.
What does attribute sampling test?
Binary questions, such as yes/no.
What is sampling risk?
The risk that the auditor’s conclusion based on a sample may differ from the conclusion when the same procedure is applied to the entire population.
What is a non-sampling risk?
The risk of an erroneous conclusion caused by a factor not related to sampling risk. IE the auditor may apply inappropriate procedures or misinterpret audit evidence and not recognize misstatements or control deviations
To determine the sample size for a test of controls, what should the auditor considers?
(1) the tolerable rate of deviations from the control being tested, (2) the expected actual rate of deviations, and (3) the allowable risk of overreliance. An increase in the allowable risk of overreliance, an increase in the tolerable rate, and a decrease in the expected rate each has the effect of reducing the required sample size.
What does non-statistical (judgement) sampling use?
The auditor’s subjective judgement to determine the sample size and sample selection.
When is monetary-unit sampling more useful?
If there are few misstatements are expected, and overstatement is the most likely kind of misstatement.
What is the precision or confidence interval?
An interval around the sample statistic that is expected to include the true value of the population at the specified confidence level.
What is the risk of underreliance?
That the auditor erroneously concludes that controls are less effective than they actually are.
What must be known in order to estimate the appropriate sample size required to meet the auditor’s needs in a given situation?
The acceptable level of risk
When is variable sampling used by auditors?
To estimate quantities or dollar amounts in substantive testing.
