Chapter 8

Question 1

The selection and evaluation of less than 100 percent of the items in a population of audit relevance selected in such a way that the auditor expects the sample top be representative of the population and thus likely to provide a reasonable basis for conclusions about the population

Answer 1

Audit Sampling

Question 2

Two forms of Audit Sampling

Answer 2

Statistical and Non-Statistical

Question 3

Research suggest what type of Audit Sampling is more common?

Answer 3

Non-Statistical

Question 4

AU 530.14 states what?

Answer 4

The amount of Statistical and Non-Statistical sampling should be about the same size.

Question 5

The possibility that the sample drawn is not representative of the population and that, as a result, the auditor will reach an incorrect conclusion.

Answer 5

Sampling Risk

Question 6

A sample where the the evaluatoin of that smaple results leads to the same conclusion that would be drawn if the same procedures where applied to the entire population.

Answer 6

Representative Sample

Question 7

Two Types of Decision Errors with Sampling

Answer 7

1. Risk of incorrect rejection (Type 1)

2. Risk of incorrect acceptance (Type 2)

Question 8

Type 1 errors relate to what quality of the audit?

Answer 8

Efficenciy

Question 9

Type 2 errors relate to what quality of the audit?

Answer 9

Effectiveness

Question 10

Deciding that the population tested is not acceptable when in reality it is, is what type of error?

Answer 10

Type 1

Question 11

Deciding that the population tested is acceptable when in reality it is not, is what type of error?

Answer 11

Type 2

Question 12

Nonsampling and Sampling risk make up what?

Answer 12

Detection Risk

Question 13

Nonsampling Risk is what?

Answer 13

The auditor reaches an erroneous conclusion for any other reason than sampling risk.

Question 14

What can limit Nonsampling Risk

Answer 14

1. Training
2. Planning
3. Supervision

Question 15

What is the complement to Sampling Risk?

Answer 15

Confidence Level

Question 16

What effect does a larger sample size of on Confidence Level and Sampling Risk?

Answer 16

Increases Confidence

Decreases Sampling Risk

Question 17

An decrease in the difference between the Tolerable Error and Expected Error does what to the sample size?

Answer 17

Increase the Sample Size

Question 18

The difference Between Expected Error and Tolerable Error is what?

Answer 18

Allowance for Sampling risk, or Precision

Question 19

Typical Sampling Applications (4)

Answer 19

1. Inspection of Tangible Assets
2. Inspection of Records or Documents
3. Reperformance
4. Confirmation

Question 20

Sampling technique that is used to estimate the proportion of a population that possesses a specified characteristic.

Answer 20

Attribute Sampling

Question 21

Sampling technique that uses attribute-sampling theory and techniques to estimate the monetary amount of misstatement.

Answer 21

Monetary-Unit Sampling

Question 22

Sampling technique that uses normal distribution theory to estimate the dollar amount of misstatement.

Answer 22

Classical Variable Sampling

Question 23

Frame

Answer 23

Physical Representation of the Population

Question 24

3 Inputs for Sample Size

Answer 24

1. Confidence Level
2. Tolerable Deviation Rate
3. Expected Deviation Rate

Question 25

The maximum deviation rate from a prescribed control that the auditor is willing to accept and still consider the control effective.

Answer 25

Tolerable Deviation Rate

Question 26

The probability that the true but unknown measure of the characteristic of interest is within the specified limits

Answer 26

Desired Confidence Level

Question 27

Tolerable Deviation rate is inversely related to what?

Answer 27

Sample Size

Question 28

A randomly chosen sample may not be representative of the population as a whole on the characteristic of interest.

Answer 28

Sampling risk

Question 29

The likelihood of assessing control risk too high is the risk that the sample selected to test controls...

Answer 29

Does not support assessed control risk when the true operating effectiveness of the control justifies such an assessment.

Question 30

Sample size varies indirectly with what?

Answer 30

Tolerable deviation rate

Question 31

What type of sampling would be used for examining supporting documentation for purchases for evidence of proper authorization?

Answer 31

Attribute Sampling

Question 32

How should a missing document in a sample be treated?

Answer 32

As a Deviation

Question 33

Upper Deviation Rate (UDR)

Answer 33

Sample Deviation Rate + Allowance for Sampling Risk

Question 34

Name a type of evidence that most likely utilizes sampling.

Answer 34

Confirmation

Question 35

The risk of incorrect rejection is associated with...

Answer 35

Sampling Risk

Question 36

What type of statistical testing is likely to be used for a test of controls?

Answer 36

Attribute Sampling

Question 37

Steps that are different for Nonstatistical sampling vs Statistical Sampling

Answer 37

1. Determining Sample Size 2. Selecting Sample Items 3. Calculating the Upper Deviation Rate