Chat with AIExam 17: Audit Sampling for Tests of Details of Balances
There are 14 steps to audit sampling for tests of details of balances,divided into three sections: plan the sample,select the sample and perform the audit procedures,and evaluate the results.Discuss 5 of the 9 steps included in the "plan the sample" section for nonstatistical sampling.
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VerifiedThe steps comprising the "plan the sample" section are:
1. State the objectives of the audit test.For tests of details of balances,the objective is to determine whether the account balance being audited is fairly stated.
2. Decide whether audit sampling applies.In certain situations,the auditor may choose to test all large items and no small items.In those situations,the auditor has not sampled.
3. Define a misstatement.A misstatement exists whenever a sample item is misstated.
4. Define the population.The population is defined as the items making up the recorded dollar population.
5. Define the sampling unit.For nonstatistical sampling in tests of details of balances,the sampling unit is almost always the items making up the account balance.
6. Specify tolerable misstatement.This is the application of performance materiality to a particular sampling procedure.
7. Specify the acceptable risk of incorrect acceptance (ARIA).This is the risk that the sample supports the conclusion that the recorded account balance is not materially misstated when it is materially misstated.ARIA measures the auditor's desired assurance for an account balance.
8. Estimate misstatements in the population.The auditor typically makes this estimate based on prior experience with the client and by assessing inherent risk,considering the results of test of controls,substantive tests of transactions,and analytical procedures already performed.
9. Determine the initial sample size.In nonstatistical sampling,this is determined judgmentally considering the previous eight factors.
An auditor uses monetary unit sampling with a sampling interval of $20,000 and detects an item with a recorded amount of $10,000 with an audited value of $4,000.The projected misstatement of the sample is
(47) VerifiedA
The allowance for sampling risk when no misstatements are found in the sample is
(32) VerifiedB
What is the purpose of applying stratified sampling to a population?
(39) When using monetary unit sampling,evaluating the likelihood of unrecorded items in the population is
(40) Which of the following needs to be considered when the auditor generalizes from the sample to the population?
(31) If the auditor believes that there will be more than just a few exceptions discovered,and desires an accurate estimate of the dollar value of the exceptions,he or she will use
(46) Monetary unit sampling is not particularly effective at detecting
(26) Acceptable risk of incorrect acceptance is directly affected by acceptable audit risk.
(33) Estimated misstatement in the population and sample size are inversely related;that is,as estimated misstatement increases,sample size decreases.
(36) If the misstatement in a population is larger then tolerable misstatement without considering sampling error,the population will be considered unacceptable.
(33) When using nonstatistical sampling,the auditor must subjectively consider whether the True population misstatement exceeds a tolerable amount.This is done by considering five factors.One factor is the difference between the point estimate and tolerable misstatement.State the other four factors the auditor must consider.
(37) When the sample selection is done using probability proportional to size sample selection (PPS),
(41) If analytical procedures are performed with no indications of likely misstatements,ARIA will ________ and the sample size will ________.
(38) In monetary unit sampling,the relationship between tolerable misstatement size and required sample size is
(34) The confidence coefficients for ARIA are different from the confidence level.
(42) The acceptable risk of incorrect rejection is important only when there is a ________ cost to increasing the sample size.
(37) An important statistic to consider when using a statistical sampling audit plan is the population variability.The population variability is measured by the
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