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CPA AUD > AUD 5 - Audit Sampling > Flashcards

AUD 5 - Audit Sampling Flashcards

1
Q

What is defined as the risk that the sample is not representative of the population and that the auditor’s conclusion will be different from the conclusion had the auditor examined 100% of the population?

A

Sampling risk

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2
Q

What type of sampling is primarily used for testing internal controls?

A

Attribute sampling

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3
Q

What type of sampling is typically used in substantive testing of account balances?

A

Variables sampling

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4
Q

What is defined as the uncertainty inherent in applying audit procedures?

A

Audit risk

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5
Q

Audit risk includes both uncertainties due to ______ and uncertainties due to factors other than _______.

A

Sampling

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6
Q

The auditor is concerned with what two aspects of sampling risk in substantive testing?

A
  • Risk of incorrect acceptance

- Risk of incorrect rejection

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7
Q

What is the risk of incorrect acceptance?

A

Risk that the sample supports the conclusion that the recorded account balance is not MM when in fact is is MM

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8
Q

What is the risk of incorrect rejection?

A

Risk that the sample supports the conclusion that the recorded account balance is MM when in fact it is not MM

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9
Q

What is the risk of incorrect acceptance also known as?

A

Beta risk

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10
Q

What is the risk of incorrect rejection also known as?

A

Alpha risk

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11
Q

The auditor is concerned with what two aspects of sampling risk in tests of controls?

A
  • Risk of assessing control risk too low

- Risk of assessing control too high

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12
Q

Efficiency is lost with ______ risk.

A

Alpha

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13
Q

Effectiveness is lost with _____ risk.

A

Beta

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14
Q

Give an example of nonsampling risk.

A
  • Use inappropriate audit evidence

- Improperly evaluating the results

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15
Q

True or false.

Attribute sampling generally deals with yes/no questions.

A

True

EXPLANATION: For example, “Are time cards properly authorized (i.e. to assure recorded hours were worked)?”

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16
Q

Would the sample size increase or decrease if the risk of assessing control risk too low increased to 10%?

A

Smaller sample size

17
Q

Would the sample size increase or decrease if the tolerable deviation rate increased to 7%?

A

Smaller sample size

18
Q

Would the sample size increase or decrease if the expected deviation rate decreased to 0%?

A

Smaller sample size

19
Q

An auditor who uses statistical sampling for testing IC should reduce the planned reliance on a prescribed control when the sample rate of deviation plus the allowance for sampling risk exceeds what?

A

Exceeds the tolerable rate

20
Q

What is defined as the maximum monetary misstatement in the related account balance or class of transactions that the auditor is willing to accept?

A

Tolerable misstatement

21
Q

When is stratification commonly used?

A

When a population has highly variable recorded amounts

22
Q

What does PPS sampling stand for?

A

Probability proportional to size sampling

23
Q

What is considered a hybrid method because it uses attribute sampling theory to express a conclusion in dollar amounts rather than as a rate or occurrence?

A

PPS Sampling (probability proportional to size sampling)

24
Q

PPS Sample Size Determination. How do you calculate the sampling interval?

A

= tolerable misstatement / reliability factor

EXPLANATION: Tolerable misstatement is the max dollar error that may exist in the account w/o causing the f/s to be MM. The reliability factor is from a table.

25
Q

PPS Sample Size Determination. What do the reliability factors correspond to?

A

Risk of incorrect acceptance (generally obtained from a table)

26
Q

PPS Sample Size Determination. How do you calculate the sample size?

A

= recorded amount in population / sampling interval

27
Q

Does the absence of monetary misstatements imply that controls are operating effectively?

A

NO

28
Q

Indicator of control deficiency or material weakness in IC.

Id of immaterial fraud perpetrated by senior management.

A

Material weakness in IC

29
Q

While it is recommended that the written communication be made by the report release date, a window extending how many days beyond the release date is acceptable?

A

60 days

30
Q

Under PCAOB standards, auditors of issuers are required to perform what type of audit?

A

Integrated audit

EXPLANATION: Required to audit both the f/s and management’s assessment of the effectiveness of ICFR

31
Q

An auditor’s letter issued on significant deficiencies relating to a nonissuer’s IC observed during a F/S audit should indicate what?

A

Audit’s purpose was to report on the F/S and not to provide an opinion on IC

32
Q

The term governance is broadly interpreted to encompass who?

A

BOD and audit committee

33
Q

What is the final piece of evidentiary matter?

A

Management representation letter (MANDATORY)

CPA AUD (7 decks)

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