A5

Question 1

Audit sampling

Answer 1

Testing of less than 100% items to evaluate characteristic

Question 2

Rules of sampling

Answer 2

1
Assume that bell-shaped
2
Every item can be selected 
No bias in selection
3
Large enough and random - representative
4
Standard deviation - measure of variability

Question 3

Sampling risk

Answer 3

Sample of not 100%

Question 4

Sampling methods

Answer 4

Statistical - results are evaluated quantitatively
Non-statistical - sample size not mathematically

Both require judgement

Question 5

Advantages of statistical sampling

Answer 5

Measure the sufficiency
Prove objective basis
Design an efficient sample
Quantify sampling risk

Question 6

Types of sampling

Answer 6

Attribute sampling (IC)
Variable sampling (value)

Question 7

Sampling risks in substantive testing

Answer 7

Risk of incorrect acceptance

Risk of incorrect rejection

Question 8

Sampling risk in test of controls

Answer 8

Risk of assessing control risk too low

Risk of assessing control risk is too high

Question 9

Efficiency and effectiveness in sampling

Answer 9

Incorrect rejection and risk is too high - inefficient

Incorrect acceptance and risk is too low - effectiveness

Question 10

Attribute sampling

Answer 10

Statistical sampling method used to estimate % of occurrence of a specific attribute

Question 11

Upper deviation rate

Answer 11

Sample deviation rate + allowance for sampling risk = upper deviation rate

Question 12

Discovery sampling

Answer 12

Type of attribute sampling appropriate when believes deviation rate 0 or near

Question 13

Variable sampling

Answer 13

Estimate in dollar value

Question 14

Variable sampling plan

Answer 14

Mean-per-unit (average)
Ratio estimation (< sample)
Difference estimation (

Question 15

PPS sampling

Answer 15

Technique where the sampling unit is defined as an individual dollar in a population

Question 16

Sampling interval and size

Answer 16

Sampling interval = tolerable misstatement / reliability factor

Sampling size = recorded amount of population / sampling interval

Question 17

Qualitative considerations

Answer 17

The nature and cause of deviation

The possible relationship of deviations to other phases of the audit

Question 18

Accountant communicates internal control-related matters

Answer 18

FS audit (non-issuer) SAS
Examination of IC (non-issuer) SSAE
Audit of IC PCAOB (issuer)

Question 19

Control deficiency (significant)

Answer 19

Design or operation of a control does not allow to prevent and detect misstatements

Require attention

Question 20

Material weakness

Answer 20

Reasonable possibility that material misstatement of FS will not be prevented or detected

Question 21

Indications of material weakness

Answer 21

Any level of fraud by SM
Restatement of FS
Ineffective oversight

Question 22

Consider when assessing deficiencies

Answer 22

Magnitude

Likelihood

Question 23

Terms of IC deficiency communication

Answer 23

60 days of the report release day

Question 24

PCAOB requirements re IC

Answer 24

FS + audit of managements’ assessment of the effectiveness of IC over financial reporting

Question 25

Management representation

Answer 25

``` Obtained at the end Mandatory Dated same date Signed by CEO & CFO Materiality ```

Question 26

Content of rep letter

Answer 26

``` Fair FS, DIM IC Complete information Fraud Compliance Litigations Estimates Related parties Subsequent events ```