Audit Sampling

Question 1

The selection of less than 100% of the population of audit relevance, and the evaluation of that sample, such that the auditor expects the items selected to be representative of the population, and thus likely to provide a reasonable basis for conlusions about the population–used in both tests of controls and substantive tests of details

Answer 1

Audit sampling

Question 2

A sample that will result in conclusions that, subject to the limations of sampling risk, are similar to those that would be drawn if the same procedures were applied to the entire population

Answer 2

Representative sample

Question 3

The risk that the auditors’ conclusion based on the sample may be different from the conclusion if the entire population were subjected to the same audit procedure

Answer 3

Sampling risk

Question 4

Type of sampling that allows the auditor to design an efficient sample, measure it, and objectively quantify sampling risk to limit it to a level considered acceptable–but there are costs involved in training, designing, and selecting)

Answer 4

Statistical sampling

Question 5

All aspects of audit risk that are not due to sampling–can be controlled by adequate planning and supervision of audit work and proper adherence to quality control standards

Answer 5

Nonsampling risk–human type error

Question 6

audit procedure directed toward the desgin or operation of a control to assess its effectiveness in preventing or detecting material misstatements in a financial statement assertion

Answer 6

Test of controls–sampling may be used

Question 7

Audit procedures used to obtain evidence about the validity and properity of hte accounting treatment of transactiosn and balances

Answer 7

Substantive tests–sampling may be used

Question 8

Audit procedures in which a single sample is used to test a control AND to serve as a substantive test of a recorded balance or class of trnasactions–select higher sample size ofthe 2

Answer 8

Dual test–may use sampling

Question 9

A type of statistical sampling used in tests of controls that reaches a conclusion in terms of rate of occurance

Answer 9

Attributes sampling

Question 10

A type of statistical sampling used in substantive sampling that reaches a conclusion in dollar amounts

Answer 10

Variables sampling

Question 11

Attributes sampling method in which every sampling unit has the same probability fo being selected, and every combination fo sampling units of equal size hhas the same probability of being selected

Answer 11

Random number sampling

Question 12

An attributes sampling method in which every nth item is selected after a random start

Answer 12

Systematic sampling

Question 13

An attributes sampling method conisting of units being seelcted without any conscious bias, that is, without any special reaosn for including or omitting items from teh same–not used for statistical sampling b/c doesnt’ give the auditor to measure the proability of slecting a given combination of sampling units

Answer 13

Hapahazard sampling

Question 14

A method of sampling consisting of contiguous units–easy, but generally the least desireable method b/c not representative

Answer 14

Block sampling

Question 15

Type of relationship that exists between the risk of assessing control risk too low and sample size

Answer 15

Inverse

Question 16

The maximum rate of deviation from a prescribed control structure policy or procedure that an auditor is willing to accept without modifying the planned assessed level of control risk; a function of:

1) the planned assessed level of control risk
2) the degree of assurance desired by the sample

Answer 16

Tolerable rate

Question 17

An estimate of the deviation rate in the entire population–if exceeds tolerable rate, tests will not be performed–used only to determine sample size; not to evaluate sample results

Answer 17

Expected population deviation rate

Question 18

Type of relationship that exists between the expected deviation rate and sample size

Answer 18

Direct

Question 19

Describes the fact that an increase in the size of the population normally increasesthe sample size; however any population> 5,000 can be treated as infiinite

Answer 19

Population effect

Question 20

A sampling plan for which the sample is selected in several steps, with the need to perform each step conditional on the results of the previous steps

Answer 20

Sequential (stop or go) sampling

Question 21

A procedure for detemrining the sample size required to have a stipulated porability of observing at least one occurrence when teh expected poulaiton deviation irate is ata designated level

Answer 21

Discovery sampling

Question 22

Represents the sample deviation rate plus an allowance for sampling risk

Answer 22

Upper deviation limit

Question 23

An estimate used in variables sampling of the maximum monetary misstatement that may exist in an account balance or class of trnasactions, when combined with misstatements in other accounts, without causing the financial statements to be materially misstated (As this increases, sample size decreases)

Answer 23

Tolerable misstatement

Question 24

misstatement divided by book value–does not exist if book value> misstatement

Answer 24

Taint

Question 25

Reliability factor x Sampling interval

Answer 25

Basic precision

Question 26

Variables sampling method that uses normal distribution theory to evaluate selected characteristics of a population on the basis of a sample

Answer 26

Classical variables sampling models

Question 27

For samples over this size, the distribution of sample means tend to be normally distribriuted about its own mean, even if the population is not normally distributed

Answer 27

30; Central Limit Theorem

Question 28

measures the dispersion among the respective amounts of a particular chracteristic, for all items in the population for which a sample estimate is developed

Answer 28

Standard deviation

Question 29

A classical variables sampling technique that projects the sample average to the toal population by multiplying thesame average by the number of items in the population

Answer 29

Mean-per-unit estimation

Question 30

A classical variables sampling technique that uses the average difference between audited amounts and individual recorded amoutns to estimate hte total audited amount of a population and an allowance for sampling risk

Answer 30

Difference estimation

Question 31

A classical variables ampling technique that uses the ratio of audited amoutns to recorded amounts in the sample to estimate the total dollar amount of the population and an allowance for sampling risk

Answer 31

Ratio estimation

Question 32

Uses both the average ratio and the average difference in calculating an estimate of the total amount for the population

Answer 32

Regression approach

Question 33

Classical variables sampling approaches used as alternatives to mean-per-unit estimation, in that they require a smaller sample size; can only be used if both of the following:

1) invidiual book values must be known and must sum to the toal book value
2) There must be more than few differences (20+) b/t audit and book values

Answer 33

Difference and ratio estimation

Question 34

Classical variables sampling technique that separates a population into relatively homogenous groups to reduce the sample size by minimizing hte effect of variation of items in the population; most frequently used with the mean-per-unit technique; primary objective is to decreasethe effect of variance in the total population and thereby reduce sample size

Answer 34

Stratification