SU 14 - Evidence - SAMPLING Flashcards
Explain differences between statistical and nonstatistical sampling
Statisical:
RANDOMLY selects sample items
OBJECTIVE method of determining sample size and selection
CAN quantitatively assess confidence level and precision
PERMITS auditor to measure SAMPLING RISK
Conclusions associated with sampling risk:
Overreliance or INCORRECT ACCEPTANCE: Beta, type 2 error, affects audit EFFECTIVENESS, more likey to result in an inappropriate OPINION, CONTROLS are more effective than they actually are
Underreliance or INCORRECT REJECTION: Alpha, type 1 error, affects audit EFFICIENCY and results in MORE work, CONTROLS are LESS effective than they actually are
True state of the POPULATION equals
The actual rate of DEVIATIONS in the POPULATION
What is the primary objective of stratification?
To reduce the EFFECT of HIGH variability by dividing the population into subpopulations.
Important distinction with control deviations
The FAILURE to apply controls does NOT automatically result in a misstatement. The deviation DOES increase the RISK of MATERIAL MISSTATEMENT
In attribute sampling for TESTS of CONTROLS, the auditor should consider:
The allowable risk of OVERRELIANCE
The auditor must estimate a POPULATION deviation rate
In performing tests of DETAILS, what two aspects of sampling risk is the auditor concerned about?
RISK of incorrect ACCEPTANCE
RISK of incorrect REJECTION
In performing tests of CONTROLS, what two aspects of sampling risk is the auditor concerned about?
RISK of OVERRELIANCE
RISK of UNDERRELIANCE
To determine the sample size for a test of CONTROLS, the auditor considers:
Tolerable rate of deviation
Expected actual rate of deviation
Allowable risk of OVERRELIANCE
What is the relationship between the expected population deviation rate and the required SAMPLE SIZE?
There is a DIRECT relationship.
What happens to sample size when the population size increases?
As population size INCREASES, the required sample size increases at a DECREASING rate
What does the tolerable deviation rate depend on?
It depends on the planned assessed RMM and the assurance to be provided by the evidence in the sample.
What type of sampling allows an auditor to quantify sampling risk?
Statistical (Probability) Sampling which included Attribute sampling and Variables sampling
Changing from Unrestricted random sampling with replacement to unrestricted random sampling without replacement would do what to the sample size?
The sample size should DECREASE.
In estimating the sample size for variables sampling, what does the auditor need to know?
The acceptable level of RISK
As the acceptable level of the risk of incorrect acceptance decreases, the desired assurance increases, and the auditor DECREASES the tolerable misstatement
