Audit Sampling Flashcards
When is ratio estimation sampling technique most effective?
WHEN the calculated audit amounts are approximately proportional to the client’s carrying amounts
i.e. it calculates the population misstatement by multiplying the carrying amount of the population by the ratio of the total audit amount of the sample items
True or False.
The auditor controls the risk of incorrect acceptance by specifying that risk level for the sampling plan.
TRUE.
What would be considered an example of nonsampling risk?
The auditor selecting inappropriate auditing procedures.
i.e. Nonsampling risk is the risk of an erroneous conclusion caused by a factor not related to sampling risk.
When may Statistical sampling be applied in tests of controls?
WHEN the client’s internal controls leave an audit trail in the form of documentary evidence of their effectiveness
What is the difference between Attribute Sampling when compared with Statistical Sampling?
Attribute Sampling is used to to test the effectiveness of controls
What is the formula for the upper deviation rate?
(sample rate + allowance for sampling risk)
NOTE: This is used to evaluate the results of a statistical sample, NOT to determine a sample size
HOW would you define “Population” in a sampling application?
THE group of items about which the auditor wants to estimate some characteristic
What is the best way to describe the statistical concept of “Precision?”
AN interval around the sample statistic that is expected to include the true value of the population
e.g. an auditor normally evaluates the sampling results by calculating the possible misstatement in either direct
What is the calculation for the “tainting percentage?”
It is the difference between the recorded amount and the audited amount, divided by the recorded amount
True or False.
Monetary Unit Sampling is useful for testing a population when understatement is the primary audit consideration
FALSE.
This is inappropriate for testing a population (e.g., liabilities) when understatement is the primary audit consideration.
i.e. it is appropriate for identifying overstatement errors
What is “Nonsampling Risk?”
THE risk that the auditor may draw an erroneous conclusion for any reason not related to sampling risk
e.g. use of inappropriate audit procedures or misinterpretation of audit evidence and failure to recognize a misstatement or deviation
What is a major difference between Variable and Attribute Sampling?
Variables sampling is concerned with dollar values (e.g., monetary precision), whereas attribute sampling is concerned with deviation rates
What is a principal advantage of statistical methods of attribute sampling over nonstatistical methods?
Statistical methods of attribute sampling provide a scientific basis for planning the Sample Size
What is “Dual-purpose testing?”
THE use of a sample for both tests of controls and substantive testing
i.e. customarily this is used when the auditor believes that the rate of deviations from the prescribed control in the population is acceptable
HOW would you calculate the “allowance for sampling risk?”
By taking the achieved upper deviation limit minus the sample deviation rate
i.e. the sampling deviation rate is the amount of deviations identified from the sample
