Flashcards in Chapter 8 Deck (37)
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
Two forms of Audit Sampling
Statistical and Non-Statistical
Research suggest what type of Audit Sampling is more common?
AU 530.14 states what?
The amount of Statistical and Non-Statistical sampling should be about the same size.
The possibility that the sample drawn is not representative of the population and that, as a result, the auditor will reach an incorrect conclusion.
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.
Two Types of Decision Errors with Sampling
1. Risk of incorrect rejection (Type 1)
2. Risk of incorrect acceptance (Type 2)
Type 1 errors relate to what quality of the audit?
Type 2 errors relate to what quality of the audit?
Deciding that the population tested is not acceptable when in reality it is, is what type of error?
Deciding that the population tested is acceptable when in reality it is not, is what type of error?
Nonsampling and Sampling risk make up what?
Nonsampling Risk is what?
The auditor reaches an erroneous conclusion for any other reason than sampling risk.
What can limit Nonsampling Risk
What is the complement to Sampling Risk?
What effect does a larger sample size of on Confidence Level and Sampling Risk?
Decreases Sampling Risk
An decrease in the difference between the Tolerable Error and Expected Error does what to the sample size?
Increase the Sample Size
The difference Between Expected Error and Tolerable Error is what?
Allowance for Sampling risk, or Precision
Typical Sampling Applications (4)
1. Inspection of Tangible Assets
2. Inspection of Records or Documents
Sampling technique that is used to estimate the proportion of a population that possesses a specified characteristic.
Sampling technique that uses attribute-sampling theory and techniques to estimate the monetary amount of misstatement.
Sampling technique that uses normal distribution theory to estimate the dollar amount of misstatement.
Classical Variable Sampling
Physical Representation of the Population
3 Inputs for Sample Size
1. Confidence Level
2. Tolerable Deviation Rate
3. Expected Deviation Rate
The maximum deviation rate from a prescribed control that the auditor is willing to accept and still consider the control effective.
Tolerable Deviation Rate
The probability that the true but unknown measure of the characteristic of interest is within the specified limits
Desired Confidence Level
Tolerable Deviation rate is inversely related to what?
A randomly chosen sample may not be representative of the population as a whole on the characteristic of interest.
The likelihood of assessing control risk too high is the risk that the sample selected to test controls...
Does not support assessed control risk when the true operating effectiveness of the control justifies such an assessment.