Audit Sampling Flashcards
What two sampling factors have an inverse relationship to sample size?
1) Tolerable rate/misstatement
2) Allowable/acceptable risk
How is the sample deviation rate calculated?
Number of deviations / sample size
When conducting PPS sampling, how is sampling interval calculated?
Tolerable misstatement / reliability factor
-OR-
Population / sample size
When conducting PPS sampling, how is sample size calculated?
Population / sampling interval
Distinguish between the two types of sampling errors
Type I (Alpha) errors result from under-relying on a sample (incorrect rejection) and therefore do more work than is necessary (less efficient).
Type II (Beta) errors result from over-relying on a sample (incorrect acceptance) and therefore don’t do enough work (less effective).
Which sampling error is worse?
The Type II error is worse as the audit goal of providing reasonable assurance on the financial statements might not be achieved.
What are the two types of sampling and what phases of the audit are they associated with?
Attribute sampling is associated with the testing of controls during the internal control phase of the audit.
Variables sampling is associated with the testing of details during the substantive testing phase of the audit.
What factors determine the sample size for attribute sampling?
Tolerable Deviation
Estimated Deviation
Allowable Risk (of Type II/Beta Error)
“TEA”
What factors determine the sample size for variables sampling?
Tolerable Deviation
Estimated Deviation
Allowable Risk (of Type II/Beta Error)
Standard Deviation
“TEAS”
What effect does an increase in expected deviation rate have on sample size? Why?
Direct effect. As the expected deviation rate approaches the tolerable limit, the auditor will require a larger sample to provide greater precision in order to be comfortable.
