# Study Unit 15: questions Flashcards

When using sampling for substantive tests of details, the auditor is required to do what?

Determine the tolerable misstatement

Project the sample misstatement to the population

Select a representative sample.

What is non sampling risk?

The risk that the auditor reaches an erroneous conclusion for any reason not related to sampling risk.

What is sampling risk?

The risk that the auditor’s conclusion based on a sample may be different from the conclusion if the entire population were subjected to the same audit procedure.

As a result of tests of controls, an auditor underrelies on controls. This incorrect assessment most likely occurred because

Operating effectiveness based on the auditor’s sample is less than the true operating effectiveness of the controls.

In attribute sampling, a 10% change in which factors normally will have the least effect on the size of a statistical sample?

Population size.

A change in the size of the population has a very small effect on the required sample size when the population is large. As the population increases, the sample size also increases but at a decreasing rate.

An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps an auditor to

Measure the sufficiency of the evidence obtained.

Statistical sampling helps the auditor to design an efficient sample, to measure the sufficiency of the evidence obtained, and to evaluate the sample results. Auditors are required to obtain sufficient appropriate evidence. Sufficiency is the measure of the quantity of evidence. It relates to the design and size of the sample.

An auditor is concerned with two aspects of sampling risk in performing substantive tests of details: the risk of incorrect acceptance and the risk of incorrect rejection. The risk of incorrect acceptance is the risk that:

an auditor erroneously concludes that a material misstatement does not exist when, in fact, it does.

The risk of incorrect rejection is the risk that:

the sample supports the conclusion that a material misstatement does exist when, in fact, it does not.

What is attribute sampling?

refers to an audit sampling application for the purpsoe of estimating the percentage of a population that contains a characteristic (attribute) of interest to the auditor. This involves testing the operating effectiveness of internal control, where, for each transaction included in the sample, the control procedure of interest is either performed approprately or not. For each item in the sample there are only 2 outcomes. (authorized or not, signed or not)

An advantage of statistical over nonstatistical sampling methods in tests of controls is that the statistical methods

Provide an objective basis for quantitatively evaluating sample risks.

In a sampling application, the group of items about which the auditor wants to estimate some characteristic is called the

A.Attribute of interest.

B.Population.

C.Sampling unit.

D.Sample.

Population.

The population is the group of items about which an auditor wishes to draw conclusions. However, the difference between the targeted population (the population about which information is desired) and the sampled population (the population from which the sample is actually drawn) should be understood.

A principal advantage of statistical methods of attribute sampling over nonstatistical methods is that they provide a scientific basis for planning the

Sample size.

Statistical theory permits the auditor to measure sampling risk and to restrict it to an acceptable level. Statistical methods determine the sample size that will accomplish the auditor’s objectives.

Stratifying a population means:

dividing it into subpopulations, thereby permitting application of different sampling techniques to each subpopulation or stratum. Stratifying allows for greater emphasis on larger or more important items.

The use of the ratio estimation sampling technique is most effective when

The calculated audit amounts are approximately proportional to the client’s carrying amounts.

Ratio estimation calculates the population misstatement by multiplying the carrying amount of the population by the ratio of the total audit amount of the sample items to their total carrying amount. The precision is determined by considering the variances of the ratios of carrying amount to audited amount. Thus, the more homogeneous the ratios, the smaller the precision.

In statistical sampling methods used in substantive testing, an auditor most likely would stratify a population into meaningful groups if

The population has highly variable recorded amounts.

The primary objective of stratification is to reduce the effect of high variability by dividing the population into subpopulations. Reducing the effect of the variance within each subpopulation allows the auditor to sample a smaller number of items while holding precision and the confidence level constant

What is unrestricted random sampling?

Unrestricted random sampling means that each item in the population has an equal and nonzero chance of being selected. Sampling with replacement means that an item may be included more than once in the sample. Sampling without replacement removes an item from the population after selection. Thus, sampling without replacement uses information about the population more efficiently. It results in a smaller sample, if other things are held constant, because the sample size formula for sampling with replacement is multiplied by the finite population correction factor (always less than 1.0).

A CPA’s client wishes to determine inventory shrinkage by weighing a sample of inventory items. If a stratified random sample is to be drawn, the strata should be identified in such a way that

Each stratum differs as much as possible with respect to expected shrinkage, but the shrinkages expected for items within each stratum are as close as possible.

When the items in a population are heterogeneous, it may be advantageous to stratify the population into homogeneous subpopulations. Each stratum should differ from the others, but the items within each stratum should be similar.