Test 2 - Ch.8 Flashcards
The risk of incorrect rejection relates to what?
Efficiency of the Audit
Efficiency relates to what type of sampling error
Type 1
Provides a means of mathematically measuring the sampling risk that results from examining only a part of the data is a benefit of what?
Statistical Sampling
What are the three factors to determine sample size?
Tolerable Deviation rate, Confidence Level, Expected Deviation rate
What two factors in determining sample size can an auditor control?
Tolerable Deviation Rate & Confidence Level
The auditor most likely would give broader consideration to the implication of a deviation if it was…
The result of deliberate efforts to conceal environmental violdations
A missing item in a sample should be treated as what?
A deviation
The sum of the sample deviation rate and an appropriate allowance for sampling risk.
Upper Deviation Rate
The population size has little or no effect on determining sample size except for very small populations when test controls (T/F)
True
If the expected deviation rate exceeds the tolerable deviation rate, the auditor is most likely to…
Set control risk at the maximum without sampling
Over reliance of controls occurs when the true deviation rate in the population was…
More than the deviation rate in the auditor’s sample
TDR = 4.5% UDR = 7% Sample Deviation = 3% Confidence Level = 95% Allowance for Sampling risk = ?
4%
UDR = Sample Deviation + Allowance for Sampling Risk
An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps an auditor to…
Measure the sufficiency of evidential matter obtained
Sample to test internal controls are intended to provide a basis for an auditor to conclude whether…
The controls are operating effectively
A recorded disbursement that does not show evidence of required approval may nevertheless be a transaction that is properly authorized and recorded is an example of what?
A deviation that does not necessarily result in a misstatement
What combination of Desired Confidence level, Tolerable Deviation Rate, and Expected deviation rate would result in the greatest decrease in sample size in an attribute sample for a test of controls?
Desired Confidence Level - Decrease
TDR - Increase
Expected Population Deviation Rate - Decrease
An auditor assesses control risk higher than necessary in what type of situation?
Computer UDR exceeds the TDR in the sample, but the Deviation rate for the Population is less than the TDR
What type of relationship do sample size and tolerable deviation rate have?
Inverse
Planned level of control risk should be modified when…
Sample Deviation Rate + Allowance for sampling Risk exceeds the TDR
The deviation rate in the auditor’s sample is less than the TDR, but the deviation rate in the population exceeds the TDR is an example of what?
Type 2 error, Incorrect Acceptance
