acct 5200 final || with Error-free Solutions.
sampling correct answers to apply an audit procedure to less than 100% of items in a population
attributes sampling correct answers used to estimate the proportion of a population containing a
certain characteristic, aka ATTRIBUTE
for test of controls: look at control deviation
for substantive test of transactions: look at monetary misstatements in transactions
sampling of balances correct answers used to estimate amount of misstatement present in
account balance
representative sample correct answers one in which the characteristics in the sample of audit
interest are approximately the same as those of the population
sampling risk correct answers risk that auditor reaches incorrect conclusion because auditor
chooses a non-representative sample
in order to minimize:
-use appropriate sample selection techniques
-use large enough sample size
non-sampling risk correct answers risk that auditor reaches incorrect conclusion because audit
tests do not uncover exceptions in the sample
to minimize:
-design good tests
-avid not recognizing exceptions by using experienced auditors and avoiding boredom and
exhaustion
statistical sampling correct answers requires random sample
allows quantification of sampling risk in planning and evaluating sample
non-statistical sampling correct answers ie judgmental sampling
may use non-random sample
cannot quantify sampling risk
ex: "i am confident that the number of deviations is significantly low"---cant put a number to it
sampling steps correct answers plan sample
-determine audit objective
-define population, sampling unit
-specify the attribute of interest and exception condition
select sample and perform tests
,evaluate results
analyze exceptions
judgmental methods of sample selection correct answers block
haphazard
directed
cannot quantify sampling risk w these judgmental selections
block sampling correct answers several items in sequence
haphazard sampling correct answers items selected w/o conscious bias
directed sampling correct answers larger items, those likely to contain errors/contain some
characteristic are picked
probabilistic methods of sample selection correct answers random
systematic
probability proportional to size
stratified
random sampling correct answers each item has equal chance of being included in the sample
systematic sampling correct answers every nth item chosen
probability proportional to size (PPS) correct answers each dollar has an equal chance of being
included in the sample
stratified sampling correct answers separate population into subpopulations based on size and
choose samples for each subpopulation
attribute sampling- test of controls correct answers used to evaluate whether controls are working
well enough to support the initial control risk assessment (or transactions are being recorded
correctly enough)
this requires:
-setting a standard for what is "working well enough"
-computing an estimate of what actual performance is in the population
-comparing the standard to the estimate to decided whether CR and audit program need revision
if standard is less than estimate, need to think about other controls
3 factors that determine sampling size correct answers TER
ARO
EPER
, tolerable exception rate (TER) correct answers highest deviation rate we can find and still rely on
the control (how often can control fail and still be reliable?)
this is the STANDARD
it is a matter of auditor judgment
depends on assessed materiality and important of attribute
acceptable risk of over-reliance on a control (ARO or ARACR) correct answers risk we are
willing to take of relying on the control when it doesn't work as well as we need it to
matter of auditor judgment
depends on assessed CR
auditor's measure of control risk
estimated population exception rate (EPER) correct answers our estimate of the control's failure
rate BEFORE we begin sampling
need this to plan sample size
use preceding year's audit results or a small preliminary sample
sample exception rate (SER) correct answers number of exceptions/sample size
computed upper exception rate (CUER) correct answers highest estimated exception rate in the
population for a given ARO and sample result
our estimate of performance in the population (how many will be wrong in population, adjusted
for sampling risk)
=sample exception rate + allowance for sampling risk
determining sample size correct answers use table 15-8 which considers ARO, EPER and TER
larger samples are more precise
ARO- higher ARO = more risks = smaller sample
TER- bigger difference between TER and EPER requires less precision, so smaller sample
EPER- the worse the performance expected for the control, the large the sample needed
evaluating sample results correct answers use table looking at ARO, sample size, and number of
exceptions found to determine CUER
compare estimate of performance to the standard:
-compare CUER to TER
must also analyze character of all exceptions
sampling correct answers to apply an audit procedure to less than 100% of items in a population
attributes sampling correct answers used to estimate the proportion of a population containing a
certain characteristic, aka ATTRIBUTE
for test of controls: look at control deviation
for substantive test of transactions: look at monetary misstatements in transactions
sampling of balances correct answers used to estimate amount of misstatement present in
account balance
representative sample correct answers one in which the characteristics in the sample of audit
interest are approximately the same as those of the population
sampling risk correct answers risk that auditor reaches incorrect conclusion because auditor
chooses a non-representative sample
in order to minimize:
-use appropriate sample selection techniques
-use large enough sample size
non-sampling risk correct answers risk that auditor reaches incorrect conclusion because audit
tests do not uncover exceptions in the sample
to minimize:
-design good tests
-avid not recognizing exceptions by using experienced auditors and avoiding boredom and
exhaustion
statistical sampling correct answers requires random sample
allows quantification of sampling risk in planning and evaluating sample
non-statistical sampling correct answers ie judgmental sampling
may use non-random sample
cannot quantify sampling risk
ex: "i am confident that the number of deviations is significantly low"---cant put a number to it
sampling steps correct answers plan sample
-determine audit objective
-define population, sampling unit
-specify the attribute of interest and exception condition
select sample and perform tests
,evaluate results
analyze exceptions
judgmental methods of sample selection correct answers block
haphazard
directed
cannot quantify sampling risk w these judgmental selections
block sampling correct answers several items in sequence
haphazard sampling correct answers items selected w/o conscious bias
directed sampling correct answers larger items, those likely to contain errors/contain some
characteristic are picked
probabilistic methods of sample selection correct answers random
systematic
probability proportional to size
stratified
random sampling correct answers each item has equal chance of being included in the sample
systematic sampling correct answers every nth item chosen
probability proportional to size (PPS) correct answers each dollar has an equal chance of being
included in the sample
stratified sampling correct answers separate population into subpopulations based on size and
choose samples for each subpopulation
attribute sampling- test of controls correct answers used to evaluate whether controls are working
well enough to support the initial control risk assessment (or transactions are being recorded
correctly enough)
this requires:
-setting a standard for what is "working well enough"
-computing an estimate of what actual performance is in the population
-comparing the standard to the estimate to decided whether CR and audit program need revision
if standard is less than estimate, need to think about other controls
3 factors that determine sampling size correct answers TER
ARO
EPER
, tolerable exception rate (TER) correct answers highest deviation rate we can find and still rely on
the control (how often can control fail and still be reliable?)
this is the STANDARD
it is a matter of auditor judgment
depends on assessed materiality and important of attribute
acceptable risk of over-reliance on a control (ARO or ARACR) correct answers risk we are
willing to take of relying on the control when it doesn't work as well as we need it to
matter of auditor judgment
depends on assessed CR
auditor's measure of control risk
estimated population exception rate (EPER) correct answers our estimate of the control's failure
rate BEFORE we begin sampling
need this to plan sample size
use preceding year's audit results or a small preliminary sample
sample exception rate (SER) correct answers number of exceptions/sample size
computed upper exception rate (CUER) correct answers highest estimated exception rate in the
population for a given ARO and sample result
our estimate of performance in the population (how many will be wrong in population, adjusted
for sampling risk)
=sample exception rate + allowance for sampling risk
determining sample size correct answers use table 15-8 which considers ARO, EPER and TER
larger samples are more precise
ARO- higher ARO = more risks = smaller sample
TER- bigger difference between TER and EPER requires less precision, so smaller sample
EPER- the worse the performance expected for the control, the large the sample needed
evaluating sample results correct answers use table looking at ARO, sample size, and number of
exceptions found to determine CUER
compare estimate of performance to the standard:
-compare CUER to TER
must also analyze character of all exceptions
