Lecture 13 - Sampling And Materiality Flashcards
1
Q
What is the definition of material?
A
Relative significance of a particular matter in the context of the financial statements as a whole
2
Q
Quantitative examples of materiality?
A
- Percentage of profit
- Average profit over 3 years
- Percentage of turnover
- Shareholder equity
- Combination
3
Q
Other factors affecting materiality?
A
- Trends in profit
- Effect on ratios
- External influences
- Auditors perception of risk
4
Q
What is the standard for sampling?
A
ISA 530
5
Q
What types of sampling selection are there?
A
- random (statistical)
- systematic or interval (close to statistical)
- block (non statistical)
- haphazard (non statistical)
6
Q
What is the formula for sample size?
A
Reliability factor / Tolerable error rate
Reliability factor taken from t table
7
Q
What is monetary unit sampling for?
A
To estimate the amount by which an account is out of balance
8
Q
What is the formula for the ratio method sampling?
A
Error x population value (e.g £) / sample value (e.g. £)
9
Q
What is the difference method ratio?
A
Error x no. of population / sample no.
