Sampling

Question 1

Rule 1

Answer 1

Always assume that the population being sampled is normally distributed, that is, it can be described by a “normal,” or “bell-shaped,” curve

Question 2

Rule 2

Answer 2

• only area where CPA does not use judgement

- unrestricted and randomly selected.

Question 3

Rule 3

Answer 3

if the sample is large enough and is randomly selected, the sample will likely have the same statistical characteristics and the underlying population

Question 4

Rule 4

Answer 4

Standard deviation is a measure of “variability,” which refers to the range of values within the population.

Question 5

Attribute Sampling

Answer 5

• more likely to deal with TEST OF CONTROLS, and variables sampling generally deals with dollar values.
• identified by the option that deal with “Yes or No” situations.
• is a statistical sampling method used to estimate the rate of occurrence of a specific characteristic

Question 6

Variable Sampling

Answer 6

• Substantive Testing
• Biggest Risk or Risk of Incorrect Acceptance “Beta Risk” -Auditors biggest fear
• Risk of Incorrect Rejection - “Alpha Risk”

Question 7

Efficiency

Answer 7

• the auditor does more audit work than is necessary

- Lost with alpha risk or risk of incorrect rejection

Question 8

Effectiveness

Answer 8

• Lost with beta risk or Risk of Incorrect Acceptance

- could lead to an inappropriate opinion

Question 9

Deviation Rate

Answer 9

-auditors best estimate

Question 10

Tolerable Rate

Answer 10

• is the maximum rate of deviation from a prescribed procedure the auditor will tolerate without modifying planned reliance on internal control.