Chapter 17

Question 1

The risk that the auditor is willing to take of accepting a balance as correct when the true misstatement in the balance exceeds tolerable misstatements

Answer 1

Acceptable Risk of Incorrect Acceptance (ARIA)

Question 2

The risk that the auditor is willing to take of rejecting a balance as incorrect when it is not misstated by a material

Answer 2

Acceptable Risk of Incorrect Rejection (ARIR)

Question 3

The minimum allowance for sampling risk inherent in the sample for MUS; it is equal to the allowance for sampling risk when no misstatements are found in the sample

Answer 3

Basic Precision

Question 4

A method of variables sampling where the auditor estimates the population misstatement by multiplying the average misstatement in the sample by the total number of population items and also calculates sampling risk

Answer 4

Difference Estimation

Question 5

A method of variables sampling where the auditor estimates the audited value of a population by multiplying the average audited value of the sample by the population size and also calculates sampling risk

Answer 5

Mean-per-unit Estimation

Question 6

An estimate of the largest likely overstatement in a population at a given ARIA, using monetary unit sampling

Answer 6

Misstatement Bound

Question 7

A statistical sampling method that provides misstatement bonds expressed in monetary amounts

Answer 7

Monetary Unit Sampling (MUS)

Question 8

A method of projecting from the sample to the population to estimate the population misstatement by assuming that misstatements in the unaudited population are proportional to the misstatements found in the sample

Answer 8

Point Estimate

Question 9

Sample selection of individual dollars in a population by the use of random or systematic sample selection

Answer 9

Probability Proportional to Size Sample Selection (PPS)

Question 10

A method of variables sampling where the auditor estimates the population misstatement by multiplying the portion of sample dollars misstated by the total recorded population book value and also calculates sampling risk

Answer 10

Ratio Estimation

Question 11

Statistical conclusions that the auditor draws from sample results based on knowledge of sampling distributions

Answer 11

Statistical Inferences

Question 12

A method of sampling where all the elements in the total population are divided into two or more subpopulations that are independently tested and statistically measured

Answer 12

Stratified Sampling

Question 13

The application of performance materiality to a particular sample procedure

Answer 13

Tolerable Misstatement

Question 14

Sampling techniques for tests of details of balances that use statistical inference process

Answer 14

Variables Sampling

Question 15

The differences between Test of

Detail Balances and Test of Controls for planning the sample are…..

Answer 15

Test of Detail Balances will:
Define a misstatement
Specify tolerable misstatement
Specify acceptable risk of incorrect acceptance
Estimate misstatements in the population

Test of Detail Balances will:Define attributes and exception conditions
Specify the tolerable exception rate
Specify acceptable risk of over-reliance
Estimate the population exception rate

Question 16

The difference between Test of

Detail Balances and Test of Controls for evaluating the results is…..

Answer 16

Test of Detail Balances will:
Analyze the misstatements

Test of Detail Balances will:
Analyze the exceptions