SU 14.1 Flashcards
What’s a population?
The data that
1-a sample is selected from and
2-that conclusions are drawn from.
Non-statistical sampling
Based on the auditors subjective judgment to 1- determine the sample size 2- and sample selection
What is statistical sampling?
- Randomly selects sample
items - uses an appropriate statistical method to evaluate the results.
3.Its objective.
What the confidence level?
Also called the reliability level, the percentage of times the sample should reflect the population.
Confidence level example
If the allowable risk of over reliance or incorrect rejection is 5%, then confidence level is 95%.
What is precision (allowance for sampling risk)?
A measure of how closely the sample represents the population.
T or F: Statistical sampling provides a means to quantitatively assess confidence level and precision.
True.
What’s sufficiency and appropriateness of evidence?
Sufficiency: measures the quantity of evidence. (Is it enough info?)
Appropriateness: measures the quality of evidence. (Is it the right info?)
Statistical sampling applies to these 2 tests:
Test of controls: attribute sampling
Test of details: variables sampling
What is overreliance?
When controls are thought to be more EFFECTIVE than they actually are.
*affects audit EFFECTIVENESS and results in an inappropriate opinion.
What is undereliance?
Controls are thought to be less effective than they actually are.
This affects audit efficiency and results in more work. (You assume it’s not good enough so you do more work)
What is incorrect acceptance?
A material misstatement is said to not exist when it actually does. This type of error affects audit effectiveness and results in an inappropriate opinion.
What is incorrect rejection?
A material misstatement is thought to exist when it does not. This affects audit efficiency and results in more work.
These 2 things affects audit effectiveness
Overreliance and incorrect acceptance
(both cause a wrong opinion b/c you think things are good and they’re not)
These 2 things affect audit efficiency
Underreliance and incorrect rejection
(causes more work b/c you think things are bad when they’re not)
Examples of non sampling risk
Apply inappropriate procedures
Misinterpret audit evidence
Not recognize misstatements
Not recognize control deviations
Variables sampling represents what test?
Test of details
Attribute sampling represents what test?
Test of controls
Basic steps in a statistical plan
Determine plan objective
Define the population
Determine levels of sampling risk
Calculate sample size
Random Sampling
Each item in the population has an equal and nonzero probability of selection.
Systematic sampling
Starts randomly and then takes every nth item in the population.
Example of systematic sampling
8200 items in population
Need 50 samples
8200/50=164
Say you start with 35, 35+164= 199, then 199+164=363 etc til you have 50 samples
Block sampling
Aka cluster sampling
Selects groups of items for the sampling unit instead of individual items.
Variable sampling
test of details
Applies to dollar values or other quantities
Used to estimate the value of a population.
Primary methods of variable sampling
Mean per unit
Difference estimation
Ratio estimation
Monetary unit sampling
Calculation of Sample size
N= BV x CF / TM
N is sample size
BV is book value
CF is confidence factor
TM is tolerable misstatement
Deviations
Deviations from a control increase the RMM but do not necessarily result in misstatements.
