Evidence -- Sampling

Question 1

Statiscal Sampling in test of controls,
an example of (Attribute Sampling). In other words, a test of controls is an application of attribute sampling.

Answer 1

population size is often not considered unless it is small.

Attribute sampling is used in test of controls to estimate a deviation rate (occurrence rate) for a population.

Question 2

Non Statistical sampling uses judgement to select a sample.

Answer 2

Auditors judgment when selecting sample size.

Question 3

Variable sampling?

Answer 3

used by auditors to estimate quantities or dollar amounts in substantive testing.

Question 4

The ratio estimation technique uses the total population misstatement by multiplying the proportion of the sample misstatement by the population carrying amount.

Answer 4

this is a calculation problem

Question 5

Monetary-unit sampling
is a commonly used sampling method for test of details of balances.

Answer 5

It provides a simple statistical results expressed in dollars.

Question 6

Incorrect Acceptance
Incorrect Rejection

Answer 6

Incorrect Acceptance - is the risk of the auditor erroneously concludes that a material misstatement does not exist when it fact it does.

Incorrect Rejection - the risk that the sample supports the conclusion that a material misstatement does exist when in fact it does NOT exist.

Question 7

Attribute sampling tests binary questions, for example, it tests the effectiveness of controls by estimating a rate of occurrence of a control deviation in a population.

Answer 7

This type of sampling is most appropriate for large population with documentary evidence.

Question 8

The allowance for sampling risk equals the achieved upper deviation limit (8%) minus the sample deviation rate
(7 ÷ 200 = 3.5%), or 4.5%.

Answer 8

A sample of 200 invoices was examined, and seven of them were lacking approval. The auditor then determined the achieved upper deviation limit to be 8%.

Question 9

Monetary Unit Sampling (MUS)
The MUS sample size formula is
n = RM × RF / (TM – (AM × EF) )

MUS sampling relies on an attribute sampling approach (Poisson distribution) to reach a conclusion regarding the probability of overstating an account balance by a specified amount of dollars.

Answer 9

The variable n equals sample size, RM is the recorded or carrying amount of the account, RF is the appropriate reliability factor (always from the zero line of Table 1), TM is tolerable misstatement, AM is the anticipated misstatement, and EF is the expansion factor (from Table 2).

Question 10

Nonsampling Risk?
The risk that the auditor draws an erroneous conclusion for any reason not related to sampling risk.

Answer 10

Example includes:
use of inappropriate procedures
misinterpretation of audit evidence
failure to recognize a misstatement or deviation.