CH 15 Flashcards
Define Representative sample
1) sample of audit is the same as the population
Define Sampling risk
1) auditor reaches an incorrect conclusion because sample is not representive of poplation
Non sampling risk
an incorrect conclusion that does no relate to sampling risk
How do you minimize sampling risk?
1) adjust sample size
2) use appropriate sample selection method
What are the three steps of statistical and nonstatistical sampling?
1) Plan the sample
2) Select the sample and perform the tests
3) Evaluate the results
What are differences between Statistical and nonstatistical sampling
1) statistical sampling allows the quantification of sampling risk while nonstatistical sampling provides most useful information has been selected
Probabilistic sample selection
1) selecting a sample with know probability that represents popl
Nonprobabilistic sample selection
1) auditor uses professional judgement
What are two nonprobabilistic selection methods?
1) block sample selection (selection of item in sequence)
2) haphazard sample selection ( random selection)
What are three probabilistic selection methods?
1) simple random sample selection
2) Systematic sample selection
3) Probability proportional to size sample selection
What is a systematic sample selection?
1) calculations of an interval and then selects the items for the sample size
Define Probabilistic sample selection methods?
1) probability of selecting popl item from its recorded amount
Occurrence rate
1) percent of items in the population containing the characteristic to total number of population.
What are occurrence rate’s three types of exceptions?
1) deviations from client’s established controls
2) monetary misstatements in transactions
3) Monetary misstatements in account balances
What are terms used in auditing sampling from planning?
1) Characteristic
2) Acceptable risk of overreliance(ARO)
3) Tolerable exception rate (TER)
4) Estimated population exception rate ( EPER)
5) Initial sample size
What are the terms used in auditing sampling
1) Exception
2) sample exception rate (SER)
computed upper exception rate ( CUER)
What is the plan sample consist ?
1) State objectives
2) decide audit sampling applies
3) define attributes and exceptions
4) Define the population
5) Define the sampling unit
What are two steps of sample and perform auditing procedures?
1) select the sample
2) Perform the audit procedures
What are the three steps of evaluate the results?
1) Generalize from the sample to the popl
2) analyze exceptions
3) Decide the acceptability of the popl
What are the actions of popl is not acceptable
1) revise TER or ARO
2) expand the sample size
3) Revise assessed control risk
4) Communicate with the audit committee or management
What is the statistical sampling method is commonly used to test controls and substantive test of transactions?
1) attributes sampling
What are parameters used in frequency distribution of results
1) binomial distribution ( attribute sampling)
What are application of attributes sampling?
1) popl size is a minor consideration
2) Representativeness is ensured by the sample selection process more than by sample size
What are steps of Application of attributes sampling?
1) Select the sample
2) Perform the audit procedures
3) Evaluate the results
