Variables Sampling Flashcards
Projected Misstatement is calculated by
tainting % x sampling interval
amount at which the account should be recorded if no misstatements exist
true balance
difference between the true balance and recorded balance
misstatement
the amount the auditor determines an item should be recorded at
audited value
used to estimate the amount or value of a population (i.e. estimate the balance or the misstatement of a particular account or class of transactions)
variables sampling
provides an estimate of the amount of misstatement in the account balance or class of transactions
Monetary unit sampling (MUS)
This unit sampling defines population as the number of dollars (or other monetary unit) in an account balance or class of transactions – individual dollars are identified as sampling units
Monetary unit sampling (MUS)
Tolerable misstatement has an (blank) relationship with sample size
inverse
expected misstatement has a (blank) relationship with sample size.
direct
what are two examples of an entire “logical unit” containing the selected dollar (or monetary unit) verified by auditors in MUS
A/R: customer account
Inventory: inventory item
MUS is more effective in identifying (blank) of errors
overstatement (asset and revenue accounts)
MUS selects transactions and components reflecting smaller/larger dollar amounts
larger
MUS is not effective for (blank) or omission errors
understatement (liabilities and expenses)
MUS requires special consideration for accounts with (blank or blank) balances
zero or negative
Four factors affecting sample size of MUS
sampling risk, tolerable misstatement, expected misstatement, population size
Which two factors have an inverse effect on MUS sample size?
sampling risk, tolerable misstatement
Which two factors have a direct effect on MUS sample size
expected misstatement, population size
what determines MUS population size
recorded balance in the account or class of transactions
what determines the expected misstatement in a sample size
prior experience with client or a pilot sample
what determines the tolerable misstatement in a sample size
recorded account balance and relationship b/w recorded account balance and F/S subtotals
what determines the sampling risk in a sample size
audit risk model, prior assessments of audit risk, RMM, analytical procedure risk
The two types of sampling risk for variables sampling application are risk of incorrect (blank) and incorrect (blank)
acceptance and rejection
MUS is more appropriate than classical variables sampling when (four conditions)
a high level of variability exists
overstatements are of great concern
few misstatements are anticipated
it is difficult or impractical to estimate the standard deviation
Audit team members use professional judgment when selecting the sample when using
nonstatistical sampling methods only.
When using MUS, the audit team normally selects sampling items using a(n) ______ selection method.
systematic random
(Recorded balance - audited value) ÷ Recorded balance is the calculation of (blank)
percentage.
tainting
True or false: When the recorded balance is higher than the sampling interval, there is no need to project the misstatement to the sampling interval.
true, projected misstatement = actual misstatement
Normal distribution theory and the central limit theorem are used in (blank blank) sampling
Classical variables
Sample size varies ______ with sampling risk.
inversely
In a MUS application, the characteristic of interest is the difference between the audited value and the:
recorded value
In MUS, sampling interval is calculated by
population size / sample size
In MUS tainting percentage is calculated by
(recorded balance - audited value) / recorded balance
