Deck 16 Flashcards Preview

Audit > Deck 16 > Flashcards

Flashcards in Deck 16 Deck (20):
1

Interbank transfer schedule

provides evidence about bank transfers over a period of time. It is used to detect kiting, not to support the year-end cash balance.

2

Decrease in population variability:

Decrease sample size

3

Increase in the risk of incorrect acceptance:

Decrease sample size

4

Larger tolerable misstatement:

Decreases in sample size

5

Sampling error =

Recorded amount - audited amount

6

Tainting factor =

sampling error/recorded amount

7

Projected misstatement =

sampling interval x tainting factor

8

What affects sample size?

Variability in the population (generally represented by the standard deviation), the acceptable level of risk (i.e., the risk of incorrect acceptance), the tolerable misstatement, and the expected misstatement.

9

Attribute sampling is used to:

Test controls (Controls often relate to authorization, validity, completeness, accuracy, appropriate classification, accounting in conformity with GAAP, and proper period)

10

Sample size in an attribute sampling application is affected by:

Allowable risk of assessing control risk too low, the tolerable deviation rate, and the expected deviation rate

11

Upper deviation rate =

Sample deviation rate plus an allowance for sampling risk

12

Risk of assessing control risk too high:

Risk that the assessed level of control risk based on the sample is greater than the true risk based on the actual operating effectiveness of the control

13

What kind of sampling is used to estimate a numerical measurement of a population?

Variables sampling

14

Variables sampling is used for:

Substantive testing

15

Allowance for sampling risk =

Excess of the upper deviation rate over the sample deviation rate

16

Variables sampling is used to:

Determine whether a given account balance is reasonable

17

Primary objective of PPS sampling:

Identify overstatement errors (emphasizes larger items)

18

Attribute sampling deals with:

Yes or no questions

19

Direct relationship between expected deviation rate and:

Sample size

20

Inverse relationship between tolerable deviation rate and:

sample size