M9-Sampling: Part 2 Flashcards
The auditor may be able to reduce the required sample size by separating items subject to sampling into relatively homogenous groups on the basis of some characteristics related to the specific audit objective. (true or false)
true
An increase in tolerable misstatement results in a smaller sample size. An increase in the assessed level of control risk leads to an increase in sample size. (true or false)
true
Ratio estimation is most effective if there is a correlation between book values and audit amounts. (true or false)
true
Variable sampling is normally used to estimate a numerical measurement of a population. (true or false)
true
The auditor should consider both the qualitative and the quantitative aspects of deviation in tests of controls. Qualitative aspects might include whether deviations are indicative of an error or fraud. Such an evaluation is important because fraud is intentional, has implications beyond the direct monetary effect, and requires consideration of the implications for other aspects of the audit. Thus, a deviation initially concealed by a forged document is very serious and deserves broader consideration than a deviation of the same dollar amount due to an error. (true or false)
true
Probability Proportional Sampling (PPS) is a method designed to estimate overstatement errors. Zero balances, negative balances, and understated balances require special design considerations. (true or false)
true
When planning a sample for a test of subsequent cash receipts, the auditor should consider preliminary judgments about materiality levels. (true or false)
true
When there is a lot of variability within the population, stratification, or separating the population into relatively homogenous groups, generally results in a reduced sample size and therefore increases efficiency. (true or false)
true
A stratified sample generally is more efficient than an unstratified sample since the population is classified in a manner that emphasizes the higher dollar value items. The result is an estimate having a desired level of precision with a smaller sample size. (true or false)
true
The statistical concept of precision is used to describe the auditor’s evaluation of sampling results by calculating the possible error in either direction. (true or false)
true
Decreasing the acceptable level of risk will result in a larger sample size, which the auditor might not want to do unless the cost and effort of selecting additional sample items is low. (true or false)
true
