Introduction to sampling

Question 1

Define “nonsampling risk.”

Answer 1

Any mistake by the auditor other than sampling risk that is not a direct consequence of using a sampling approach

Question 2

Define “Type I error.”

Answer 2

The risk of underreliance on controls (i.e., the risk of assessing control risk too high); or incorrect rejection of the fairness of an account balance (The AICPA considers this an error related to efficiency.)

Question 3

List the two general approaches to audit sampling.

Answer 3

Statistical

Nonstatistical

Question 4

Define “Type II Error.”

Answer 4

The risk of over-reliance on controls (i.e., the risk of assessing control risk too low); or incorrect acceptance of the fairness of an account balance (The AICPA considers this an error related to effectiveness.)

Question 5

Define “sampling risk.”

Answer 5

The risk that the sample may not be truly representative of the population

Question 6

List the two types of statistical sampling.

Answer 6

1. )Attributes sampling (regarding internal controls)

2. )Variables sampling (regarding substantive tests).

Question 7

Define “sampling.”

Answer 7

Application of an audit procedure to less than 100% of the items within an account balance or class of transactions for the purpose of evaluating some characteristic of the balance or class