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Flashcards in Chapter 8 Deck (37):
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

Audit Sampling

2

Two forms of Audit Sampling

Statistical and Non-Statistical

3

Research suggest what type of Audit Sampling is more common?

Non-Statistical

4

AU 530.14 states what?

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

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.

Sampling Risk

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.

Representative Sample

7

Two Types of Decision Errors with Sampling

1. Risk of incorrect rejection (Type 1)
2. Risk of incorrect acceptance (Type 2)

8

Type 1 errors relate to what quality of the audit?

Efficenciy

9

Type 2 errors relate to what quality of the audit?

Effectiveness

10

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

Type 1

11

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

Type 2

12

Nonsampling and Sampling risk make up what?

Detection Risk

13

Nonsampling Risk is what?

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

14

What can limit Nonsampling Risk

1. Training
2. Planning
3. Supervision

15

What is the complement to Sampling Risk?

Confidence Level

16

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

Increases Confidence

Decreases Sampling Risk

17

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

Increase the Sample Size

18

The difference Between Expected Error and Tolerable Error is what?

Allowance for Sampling risk, or Precision

19

Typical Sampling Applications (4)

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

20

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

Attribute Sampling

21

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

Monetary-Unit Sampling

22

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

Classical Variable Sampling

23

Frame

Physical Representation of the Population

24

3 Inputs for Sample Size

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

25

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

Tolerable Deviation Rate

26

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

Desired Confidence Level

27

Tolerable Deviation rate is inversely related to what?

Sample Size

28

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

Sampling risk

29

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.

30

Sample size varies indirectly with what?

Tolerable deviation rate

31

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

Attribute Sampling

32

How should a missing document in a sample be treated?

As a Deviation

33

Upper Deviation Rate (UDR)

Sample Deviation Rate + Allowance for Sampling Risk

34

Name a type of evidence that most likely utilizes sampling.

Confirmation

35

The risk of incorrect rejection is associated with...

Sampling Risk

36

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

Attribute Sampling

37

Steps that are different for Nonstatistical sampling vs Statistical Sampling

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