Module E - Attributes of Sampling Flashcards
when is sampling used?
When the need for exact info is less important and the number of items comprising the population is large
sampling risk is…
the likelihood that the decision based on the sample differs from the decision if the overall population was looked at
sampling risk is caused by selecting a…
non-representative sample
sampling risk can be controlled by…
- determining an appropriate sample size
- ensuring all items have an equal likelihood of selection
- evaluating sample results to control risk
easiest way to get a representative sample is to…
randomly select
non sampling risk is the likelihood that that…
an incorrect conclusion is drawn for reasons unrelated to the sample
most common cause of non sampling risk is…
mistakes in evaluation sample items (misinterpreting data)
attribute sampling is used to..
estimate the extent to which a characteristic exists within a population (deviation)
attributes testing is used the the auditor’s…
study of internal control
upper limit rate fo deviation is…
estimate of the rate at which the client’s internal control is failing to function effectively
process of attributes sampling
- estimate upper limit rate of deviation
- compare to an allowable (tolerable) level
steps in sampling: planning
- determine the objective
- define the deviation condition
- define the populations
three factors affecting sample size
- risk of over reliance
- tolerable rate of deviation
- expected population deviation rate
- population size
sampling risk is established based on…
desired level of control risk
lower control risk = ____ risk of over reliance
lower
tolerable rate of deviation is based on…
desired level of control risk
lower control risk = ____ tolerable rate of deviation
lower
expected population deviation rate is estimated based on…
past audits
risk of under reliance is a ____ loss
efficiency
risk of over reliance is a ____ loss
effectiveness
risk of overreliance is the risk of…
asses control risk too low (relying on controls when you shouldn’t be)
risk of over reliance occurs when…
sample indicates controls are running effectively but they actually are not
effective loss means…
do not reduce audit risk to a sufficient level
risk of over reliance could result in…
difference of opinion
risk of under reliance means…
not relying on controls when you should be
risk of under reliance has us do ____ audit work than we need to
more
does risk of undereliance change audit opinion?
NO
risk of undue reliance Is the risk of…
assessing control risk too high
risk of under reliance occurs when..
sample indicates controls are not functioning properly but they actually are
an efficient loss is…
performing more effective substantial procedures than necessary
unrestricted random selection is..
selecting items based on random numbers matched with a population
systematic random selection is…
bypass a fixed number of items in the population, selecting each nth item
block selection…
select contiguous units
haphazard selection…
selects in a nonsystematic manner
with statistical sampling, you can only use…
unrestricted random selection or systematic random selection
sample rate of deviation =
number of deviations / sample size
1 - risk of overeliance is the…
probability that the true rate of deviation is less than or equal to the URLD
risk of over reliance is the…
probability that the true rate of deviation exceeds the URLD
URLD consists of…
- sample rate of deviation
- allowance for sampling risk
if URLD is less than or equal to TRD,
rely on controls as planned
if URLD is greater than or equal to TRD,
reduce planned reliance on controls
advantage of sequential sampling is that…
the sample may be more efficient than a fixed sampling plan
discovery sampling is used when…
deviations occur at a very low rate, but are critical in nature
with discovery sample, if one deviation is identified…
the audit team concludes that control is not operating effectively
statistical sampling allows audit team to…
control exposure to sampling risk
