CH 15

Question 1

Define Representative sample

Answer 1

1) sample of audit is the same as the population

Question 2

Define Sampling risk

Answer 2

1) auditor reaches an incorrect conclusion because sample is not representive of poplation

Question 3

Non sampling risk

Answer 3

an incorrect conclusion that does no relate to sampling risk

Question 4

How do you minimize sampling risk?

Answer 4

1) adjust sample size

2) use appropriate sample selection method

Question 5

What are the three steps of statistical and nonstatistical sampling?

Answer 5

1) Plan the sample
2) Select the sample and perform the tests
3) Evaluate the results

Question 6

What are differences between Statistical and nonstatistical sampling

Answer 6

1) statistical sampling allows the quantification of sampling risk while nonstatistical sampling provides most useful information has been selected

Question 7

Probabilistic sample selection

Answer 7

1) selecting a sample with know probability that represents popl

Question 8

Nonprobabilistic sample selection

Answer 8

1) auditor uses professional judgement

Question 9

What are two nonprobabilistic selection methods?

Answer 9

1) block sample selection (selection of item in sequence)

2) haphazard sample selection ( random selection)

Question 10

What are three probabilistic selection methods?

Answer 10

1) simple random sample selection
2) Systematic sample selection
3) Probability proportional to size sample selection

Question 11

What is a systematic sample selection?

Answer 11

1) calculations of an interval and then selects the items for the sample size

Question 12

Define Probabilistic sample selection methods?

Answer 12

1) probability of selecting popl item from its recorded amount

Question 13

Occurrence rate

Answer 13

1) percent of items in the population containing the characteristic to total number of population.

Question 14

What are occurrence rate’s three types of exceptions?

Answer 14

1) deviations from client’s established controls
2) monetary misstatements in transactions
3) Monetary misstatements in account balances

Question 15

What are terms used in auditing sampling from planning?

Answer 15

1) Characteristic
2) Acceptable risk of overreliance(ARO)
3) Tolerable exception rate (TER)
4) Estimated population exception rate ( EPER)
5) Initial sample size

Question 16

What are the terms used in auditing sampling

Answer 16

1) Exception
2) sample exception rate (SER)
computed upper exception rate ( CUER)

Question 17

What is the plan sample consist ?

Answer 17

1) State objectives
2) decide audit sampling applies
3) define attributes and exceptions
4) Define the population
5) Define the sampling unit

Question 18

What are two steps of sample and perform auditing procedures?

Answer 18

1) select the sample

2) Perform the audit procedures

Question 19

What are the three steps of evaluate the results?

Answer 19

1) Generalize from the sample to the popl
2) analyze exceptions
3) Decide the acceptability of the popl

Question 20

What are the actions of popl is not acceptable

Answer 20

1) revise TER or ARO
2) expand the sample size
3) Revise assessed control risk
4) Communicate with the audit committee or management

Question 21

What is the statistical sampling method is commonly used to test controls and substantive test of transactions?

Answer 21

1) attributes sampling

Question 22

What are parameters used in frequency distribution of results

Answer 22

1) binomial distribution ( attribute sampling)

Question 23

What are application of attributes sampling?

Answer 23

1) popl size is a minor consideration

2) Representativeness is ensured by the sample selection process more than by sample size

Question 24

What are steps of Application of attributes sampling?

Answer 24

1) Select the sample
2) Perform the audit procedures
3) Evaluate the results