Exam 15: Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Sampling risk results from the auditor's failure to recognize exceptions in transaction data.

When the SER exceeds the TER,the auditor should decide whether to increase sample size or to revise assessed control risk on the basis of cost versus benefit.

In using sampling distribution for attributes,which one of the following must be known to evaluate the sample results?

If the result obtained from a particular sample for control and substantive tests of transactions is critical to the formation of an audit opinion,which of the following is the most important to the auditor in concluding of the appropriateness and sufficiency of evidence gathered?

Nonprobabilistic sampling methods are not based on mathematical probabilities and therefore the representativeness of the sample may be difficult to determine.

Which of the following is most correct when using audit sampling for exception rates?

Tolerable exception rate (TER)is inversely related to sample size.

When auditors wish to evaluate a sample statistically,an acceptable selection method is:

Which of the following statements is not correct regarding probabilistic and nonprobabilistic sample selection?

Which of the following is the risk that an auditor will reach an incorrect conclusion because a sample is not representative of the population?

Match eight of the terms (a-k)with the definitions provided below (1-8): a.Haphazard selection b.Attributes sampling c.Block sample selection d.Judgmental sampling e.Non-probabilistic sample selection f.Probabilistic sample selection g.Random sample h.Representative sample i.Statistical sampling j.Systematic sample selection k.Sampling distribution ________ 1.The use of mathematical measurement techniques to calculate formal statistical results and quantify sampling risk. ________ 2.A non-probabilistic method of sample selection in which items are selected in measured sequences. ________ 3.A sample whose characteristics are the same as those of the population. ________ 4.A statistical,probabilistic method of sample evaluation that results in an estimate of the proportion of items in a population containing a characteristic of interest. ________ 5.A non-probabilistic method of sample selection in which items are chosen without regard to their size,source,or other distinguishing characteristics. ________ 6.An auditor selects items such that each population item has a known probability of being included in the sample. ________ 7.A frequency distribution of the results of all possible samples of a specified size that could be obtained from a population containing some specific parameters. ________ 8.A sample in which every possible combination of elements in the population has an equal chance of constituting the sample.

The upper limit of the interval estimate is also known as the confidence interval.

In practice,auditors do not know whether a sample is representative,even after all testing is complete.

A principal advantage of statistical methods of attributes sampling over nonstatistical methods is that they provide a scientific basis for establishing the:

Whenever auditors use sampling,they risk making incorrect conclusions about the population.The risk that the auditor concludes that controls are nore effective than they actually are is known as the:

Describe each of the four types of sample selection methods commonly associated with statistical audit sampling.

The most serious shortcoming of the haphazard sample selection method is:

Briefly explain why auditors utilize audit sampling.

Discuss two causes of nonsampling risk.Also discuss ways the auditor can control nonsampling risk.