AUD 5 - Sampling and Communications Flashcards
In variable sampling, which risk is Beta Risk?
Allowable risk of incorrect acceptance. You say say sample indicates the pop is correct, when its not actually correct. Your decision was wrong.
In variable sampling, which risk is alpha risk?
allowable risk of incorrect rejection. You say its wrong when its right.
In att. sampling, which risk is alpha risk?
Assessing CR too high. You say it more unreliable than it really is. You say the control’s operation is not ok, when its true operation is
In att. sampling, which risk is beta risk?
Risk of CR too low. overreliance. you say control is op effect, when its not
In var. sampling, which factors have a direct relationship with sample size?
Expected MMS
SD aka pop variability
Assessed level of risk
In var. sampling, which factors have an indirect relationship with sample size?
Tolerable MMS
Acceptable level of risk
What is the formula for the sample interval in PPS?
Tolerable MMS / Reliability Factor
Also,In PPS sampling, the sampling interval is calculated by dividing the recorded amount of the population (not the number of physical units) by the sample size.
What is the formula for sample size in PPS?
Recorded am of population / Sampling Interval
What the difference is between a control deficiency, significant deficiency and material weakness?
- Control Deficiency is less severe
- Signif. def. is more severe but less than a material weakness
- Material weakness is the worst.
WHAT ARE THE INDICATORS OF A MATERIAL WEAKNESS?
a. ID of any level of fraud (even immaterial) by senior mgt
b. Restatement of prev. issued FS to correct MMS
c. ID by aud of MMS that we know wouldn’t have been detected by IC
d. Ineffective govnance oversight
for FS audit of nonissuer where deficiencies are ID’d: significant deficiences and material weaknesses need to be communicated in writing to mgt and govnance, while just control deficiencies c/be orally or in writing
for FS audit of nonissuer where deficiencies are ID’d: significant deficiences and material weaknesses need to be communicated in writing to mgt and govnance, while just control deficiencies c/be orally or in writing
in an audit of non issuer, control defic and sig/mat weaks all need to be reported report plus 60
for an examination of IC though control def. is report plus 60 and sig./mat weaks are by the report release date
Communication of control deficiencies:
a. in a FS audit, comm of sig. deficiencies and mat weaks m/be made w/in 60 days of report release date but in an actual aud of IC the comm m/be made by the report release date
Communication of control deficiencies:
b. in a FS aud the comm of sig. deficiencies and mat weaks s/include restricted use language but in an actual aud of IC theres no restriction on the use of the report
The things that unless all govnance also involved in mgt s/be communicated to govnance:
a. sig issues/findings in aud
b. mat corrected MMS
c. mgt reps requested by auditor
d. mgt consultation w/other accountants
In PPS , when there is an error in an interval, what’s the way to project and figure out the total error for the interval / population
(Error in account / total recorded amount of account) x interval $ amt
if total account is more than the interval amount, the error is not tainted and the amount of error for the interval is the total $ amount of the error.
