Audit Sampling Ivory Book Tidrick Flashcards
What is sampling?
The selection and evaluation of less than 100 percent of the population of audit relevance such that the auditor expects the items selected to be representative of the population.
What is a population?
The entire set of data from which a sample is selected and about which the auditor wishes to draw conclusions.
What is non statistical sampling?
Referred to as “judgmental sampling” and involves the auditor choosing a sample without any conscious bias (although a subconscious bias cannot necessarily be ruled out) (instinct experience)
What is statistical sampling?
This is defined as an approach to sampling that has the following 2 characteristics:
Random selection of the sample, which means that each sampling unit has an equal probability of being selected, and
The use of a sampling technique to appropriately evaluate the results of the sampling application.
What is the primary advantage associated with statistical sampling?
involved quantifying “sampling risk” to determine the necessary sample size, which establishes how much audit evidence is required (related to the notion of “sufficiency” regarding the quantity of evidence required in the circumstances).
Does statistical sampling eliminate the need for judgement in the sampling application?
No, numerous judgments must be made; but these judgments must be made explicitly when using a statistical sampling approach.
What is attributes sampling?
Sampling to decide whether ICs of interest are actually working as designed
What is variables sampling?
Sampling to decide whether account balances are fairly stated.
What is sampling risk?
Risk that the auditor’s conclusion based on a sample may be different from the conclusion if the entire population were subjected to the same audit procedure. (auditor might select a sample that is not truly representative of the population)
What is nonsampling risk?
The risk that the auditor reaches an erroneous conclusion for any reason not related to sampling risk
What is Type 1 error? (false rejection) (Efficiency)
Test of controls-> the risk of assessing control risk too high (also called the risk of under reliance of internal controls)
Substantive testing-> the risk of incorrect rejection
What is Type 2 error? (false acceptance) (effectiveness)
Tests of controls-> the risk of assessing control risk too low (also called the risk of over reliance on internal controls)
Substantive testing-> the risk of incorrect acceptance.
What are the 4 sampling types?
Random-always appropriate for statistical sampling
Systematic-may be used for statistical sampling
Block-never appropriate for statistical sampling (maybe appropriate for judgmental)
Haphazard-never appropriate for statistical sampling
Attributes sampling:
Refers to an audit sampling application for the purpose of estimating the percentage of a population that contains a characteristic “attribute” of interest to the auditor. Only 2 outcomes.
What is the tolerable rate of deviation:
A rate of deviation set by the auditor in respect of whihc the auditor seeks to obtain an appropriate level of assurance that the rate of deviation set by the auditor is not exceeded by the actual rate of deviation in the population.
