AUD 5

Question 1

Is nonstatistical sampling allowed by GAAS?

Answer 1

YES. Auditor can use judgement in determining sample size and evaluate results judgementally.

Question 2

What type of sampling estimates rate of occurrence? What estimates numerical quantity?

Answer 2

Attribute sampling-rate of occurrence, test of internal control.
Variables sampling and PPS sampling–quantity, substantive test.

Question 3

In determining sample size for attibute sampling, should auditor consider the expected deviation rate of population?

Answer 3

YES. higher then larger sample size.

Question 4

What’s upper deviation rate? determined by?

Answer 4

It’s the actual sample deviation rate + allowance for sampling risk. It’s determined by the actual sample deviation and the acceptable risk of assessing control risk too low.

Question 5

How to determine if the tested control can be relied upon after conducting attribute sampling?

Answer 5

Compare upper deviation rate of sample to tolerable deviation rate.

Question 6

How to determine if the tested balance book value is acceptable after conducting variable sampling?

Answer 6

If the client’s book value falls within the acceptable range (point estimate based on sample results +/- the allowance for sampling risk), it’s fairly stated.

Question 7

How is sampling interval, which will determine sample size, decided in PPS sampling?

Answer 7

Sampling interval=tolerable misstatements/reliability factor.
Reliability factor is determined by the acceptable risk of incorrect acceptance from a table.

Question 8

For a nonissuer, can an auditor be engaged to audit it’s internal control?

Answer 8

NO. Not audit, examination–governed by SSAE. And must be integrated with an audit of the entity’s FS. If just a nonissuer audit, no need to express opinion on IC.

Question 9

Nonissuers, Does the auditor need to communicate with governance about all internal control deficiencies identified during a FS audit?

Answer 9

NO. Significant deficiency and material weaknesses only. other control deficiencies to management only and in writing, and inform governance that such communication have been made.

Question 10

Nonissuer, what are extra requirements for mgt when auditor’s engaged to report on IC (integerated audit)?

Answer 10

Mgt must supply a report on IC( accompanying audit report)–include mgt’s assersion of the effectiveness of IC, etc. And supply a written rep letter.
For nonissuer, Auditor may report on IC or mgt’s assersion about IC. But if there’s material weakness, should express opinion directly on IC.