chapter 11

Question 1

What approaches can an auditor take to select items for testing?

Answer 1

All items (100%), Selecting specific items, Representative sample of items from a population.

Question 2

What is the difference between sampling error and non-sampling error?

Answer 2

Sampling risk: auditor comes to incorrect conclusion cause sample doesn’t reflect population.

Non-sampling risk: auditor reaches wrong conclusion because outliers were included in the sample, or inefficient audit procedures.

Question 3

How can you control sample risk?

Answer 3

1. Increase sample size
2. Use appropriate method of selection

Question 4

What are the 3 stages of sampling?

Answer 4

1. Planning: plan what to sample and how much
2. Performance: select sample and perform tests
3. Evaluation: evaluate results

Question 5

What is the difference between Statistical sampling and Non-statistical sampling?

Answer 5

Statistical sampling: uses math to measure sample risk
Non-statistical sampling: uses professional judgment to determine sample risk

Question 6

Which stage of sampling does Statistical and Non-statistical sampling apply to?

Answer 6

Step 1: Planning

Question 7

What is the difference between Probabilistic sample selection and Non-probabilistic sample selection?

Answer 7

Probabilistic sample selection: randomly select items from population

Non-probabilistic sample selection: auditor uses professional judgment to select items

Question 8

What stage of sampling does Probabilistic sample selection and Non-probabilistic sample selection relate to?

Answer 8

Step 2: Performance

Question 9

What is audit sampling? When & why do we rely on audit sampling?

Answer 9

Inefficient to test the entire population. Take a sample that represents the population and perform audit procedures on that.

Question 10

What is the process in place for sampling tests of controls & tests of details?

Answer 10

Probabilistic and Non-probabilistic sampling

Question 11

What is the difference in objectives for test of controls vs. test of details?

Answer 11

Test of controls is to determine whether or not the controls in place are effective. Test of details checks to see if the values on the financials/transactions are accurate

Question 12

How do audit data analytics differ from sampling?

Answer 12

Audit data analytics can take the full population and determine if values are materially misstated or not. Sampling represents a portion of the population.

Question 13

In what ways do auditors apply professional judgment to sampling techniques?

Answer 13

Non-statistical sampling and Non-probabilistic sampling.

Determine sampling risk using professional judgment. Select sample using professional judgment instead of randomly.

Question 14

What are auditors concerned with when testing controls?

Answer 14

Exceptions or deviations

Question 15

What are auditors concerned with when testing for details?

Answer 15

Misstatements