5.03 - VARIABLE SAMPLING Flashcards
5.03 - VARIABLE SAMPLING
For which of the following audit tests would an auditor most likely use variables sampling?
A) Confirming proof of cancellation for a sample of payment vouchers associated with cash disbursements.
B) Confirming that monthly reconciliations of key balance sheet accounts were conducted.
C) Inspecting purchase orders for proper approval by supervisors.
D) Determining that all payables are recorded at year end.
D) Determining that all payables are recorded at year end.
Variable estimation sampling is used to estimate a numerical amount that can be compared to a recorded amount. This
might include estimating payables to compare to the amount recorded at year-end.
Checking for characteristics such as approval of purchase orders, cancellation of documents supporting cash disbursements, and the monthly reconciliation of balance sheets accounts would all be accomplished using attribute sampling, not variable estimation sampling
5.03 - VARIABLE SAMPLING
An auditor established a $60,000 tolerable misstatement for an asset with an account balance of $1,000,000. The
auditor selected a sample of every twentieth item from the population that represented the asset account
balance and discovered overstatements of $3,700 and understatements of $200. Under these circumstances, the
auditor most likely would conclude that
A)There is an unacceptably high risk that the tolerable misstatement exceeds the sum of actual overstatements and understatements.
B) There is an unacceptably high risk that the actual misstatements in the population exceed the tolerable misstatement because the total projected misstatement is more than the tolerable misstatement.
C) The asset account is fairly stated because the total projected misstatement is less than the tolerable misstatement.
D) The asset account is fairly stated because the tolerable misstatement exceeds the net of projected actual
overstatements and understatements.
B) There is an unacceptably high risk that the actual misstatements in the population exceed the tolerable misstatement because the total projected misstatement is more than the tolerable misstatement.
With a detected overstatement of $3,700 and a detected understatement of $200, the auditor would conclude that the
sample has a total misstatement of $3,900.
If the sample represents 1/20 of the population, the $3,900 must be multiplied by 20 to find the $78,000 total projected misstatement in the population, which exceeds the tolerable misstatement of $60,000, suggesting that the error in the population will be unacceptably high.
5.03 - VARIABLE SAMPLING
Which of the following sampling methods would be used to estimate a numerical measurement of a population,
such as a dollar value?
A) Random-number sampling.
B) Variables sampling.
C) Stop-or-go sampling.
D) Attribute sampling.
B) Variables sampling.
Variables sampling is the method used to estimate an amount, such as the value of a population, on the basis of the
value of the population.
Attribute sampling is used to determine if a population has an attribute, such as a particular type of error and whether the frequency is at a tolerable rate.
Stop-or-go sampling is a technique of attribute sampling that is used when the error rate is expected to be low. It allows the auditor to conclude a test and draw conclusions before all items in the sample have been tested if the error rate in items tested is at an acceptably low level.
Random-number sampling is a method for selecting items to be included in a sample.
