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Undeleted > Chapter 8 > Flashcards

Chapter 8 Flashcards

1
Q

The selection and evaluation of less than 100 percent of the items in a population of audit relevance selected in such a way that the auditor expects the sample top be representative of the population and thus likely to provide a reasonable basis for conclusions about the population

A

Audit Sampling

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2
Q

Two forms of Audit Sampling

A

Statistical and Non-Statistical

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3
Q

Research suggest what type of Audit Sampling is more common?

A

Non-Statistical

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4
Q

AU 530.14 states what?

A

The amount of Statistical and Non-Statistical sampling should be about the same size.

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5
Q

The possibility that the sample drawn is not representative of the population and that, as a result, the auditor will reach an incorrect conclusion.

A

Sampling Risk

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6
Q

A sample where the the evaluatoin of that smaple results leads to the same conclusion that would be drawn if the same procedures where applied to the entire population.

A

Representative Sample

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7
Q

Two Types of Decision Errors with Sampling

A
  1. Risk of incorrect rejection (Type 1)

2. Risk of incorrect acceptance (Type 2)

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8
Q

Type 1 errors relate to what quality of the audit?

A

Efficenciy

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9
Q

Type 2 errors relate to what quality of the audit?

A

Effectiveness

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10
Q

Deciding that the population tested is not acceptable when in reality it is, is what type of error?

A

Type 1

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11
Q

Deciding that the population tested is acceptable when in reality it is not, is what type of error?

A

Type 2

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12
Q

Nonsampling and Sampling risk make up what?

A

Detection Risk

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13
Q

Nonsampling Risk is what?

A

The auditor reaches an erroneous conclusion for any other reason than sampling risk.

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14
Q

What can limit Nonsampling Risk

A
  1. Training
  2. Planning
  3. Supervision
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15
Q

What is the complement to Sampling Risk?

A

Confidence Level

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16
Q

What effect does a larger sample size of on Confidence Level and Sampling Risk?

A

Increases Confidence

Decreases Sampling Risk

17
Q

An decrease in the difference between the Tolerable Error and Expected Error does what to the sample size?

A

Increase the Sample Size

18
Q

The difference Between Expected Error and Tolerable Error is what?

A

Allowance for Sampling risk, or Precision

19
Q

Typical Sampling Applications (4)

A
  1. Inspection of Tangible Assets
  2. Inspection of Records or Documents
  3. Reperformance
  4. Confirmation
20
Q

Sampling technique that is used to estimate the proportion of a population that possesses a specified characteristic.

A

Attribute Sampling

21
Q

Sampling technique that uses attribute-sampling theory and techniques to estimate the monetary amount of misstatement.

A

Monetary-Unit Sampling

22
Q

Sampling technique that uses normal distribution theory to estimate the dollar amount of misstatement.

A

Classical Variable Sampling

23
Q

Frame

A

Physical Representation of the Population

24
Q

3 Inputs for Sample Size

A
  1. Confidence Level
  2. Tolerable Deviation Rate
  3. Expected Deviation Rate
25
Q

The maximum deviation rate from a prescribed control that the auditor is willing to accept and still consider the control effective.

A

Tolerable Deviation Rate

26
Q

The probability that the true but unknown measure of the characteristic of interest is within the specified limits

A

Desired Confidence Level

27
Q

Tolerable Deviation rate is inversely related to what?

A

Sample Size

28
Q

A randomly chosen sample may not be representative of the population as a whole on the characteristic of interest.

A

Sampling risk

29
Q

The likelihood of assessing control risk too high is the risk that the sample selected to test controls…

A

Does not support assessed control risk when the true operating effectiveness of the control justifies such an assessment.

30
Q

Sample size varies indirectly with what?

A

Tolerable deviation rate

31
Q

What type of sampling would be used for examining supporting documentation for purchases for evidence of proper authorization?

A

Attribute Sampling

32
Q

How should a missing document in a sample be treated?

A

As a Deviation

33
Q

Upper Deviation Rate (UDR)

A

Sample Deviation Rate + Allowance for Sampling Risk

34
Q

Name a type of evidence that most likely utilizes sampling.

A

Confirmation

35
Q

The risk of incorrect rejection is associated with…

A

Sampling Risk

36
Q

What type of statistical testing is likely to be used for a test of controls?

A

Attribute Sampling

37
Q

Steps that are different for Nonstatistical sampling vs Statistical Sampling

A
  1. Determining Sample Size
  2. Selecting Sample Items
  3. Calculating the Upper Deviation Rate

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