Exam 8: Audit Sampling: An Overview and Application to Tests of Controls

The likelihood of assessing control risk too high is the risk that the sample selected to test controls

Audit sampling is commonly used to gather scanning audit evidence.

Statistical sampling provides a technique for

The larger the sample,the lower the confidence level and the lower the sampling risk.

In addition to evaluating the frequency of deviations in tests of controls,an auditor should also consider certain qualitative aspects of the deviations.The auditor most likely would give broader consideration to the implications of a deviation if it was

An auditor plans to examine a sample of 20 checks for countersignatures as prescribed by the client's internal control procedures.One of the checks in the chosen sample of 20 cannot be found.The auditor should consider the reasons for this limitation and

For attributes sampling,of the three factors that enter into sample size determination,which two factors can the auditor adjust to reflect the importance of the control?

For a large population of cash disbursement transactions,Smith,CPA is testing controls by using attribute sampling techniques.Anticipating an expected deviation rate of 3 percent,Smith found from a table that the required sample size is 400 with a tolerable deviation rate of 5 percent and a desired confidence level of 95 percent.If Smith anticipated an expected deviation rate of only 2 percent but wanted to maintain the same tolerable deviation rate and confidence level,the sample size would be closest to

Your uncle Bob,a CPA,has recently started auditing and he wants your advice on some tests of sales transactions he is conducting.Bob selected a haphazard sample of 15 sales with a total book value of $75,000.In his sample,he found a total of $500 in net overstatement errors.The total sales balance per book is $10,000,000.Overall materiality for the engagement is $300,000.Tolerable misstatement for sales is $70,000.If the sample results indicate that Bob's best estimate of total misstatement in sales is $35,000,can Bob safely conclude that no additional work is needed in this area? Include in your answer a clear discussion of how sample results are compared to tolerable misstatement.

Before performing sampling procedures in an audit of controls,Sue set the tolerable deviation rate at 4.0%.After the procedures,she computes a computed upper deviation rate of 5.4%.What can Sue conclude about the client's controls?

Auditors who prefer statistical sampling to nonstatistical sampling may do so because statistical sampling helps the auditor

An auditor who uses statistical sampling for attributes in testing internal controls is most likely to reduce the planned reliance on a prescribed control when the

The computed upper deviation rate is

Audit sampling is commonly used to gather confirmation audit evidence.

To determine the sample size for a test of controls,an auditor should consider the tolerable deviation rate,the desired confidence level,and the

With a nonstatistical sampling application,the auditor relies on professional judgment rather than the laws of probability to reach a conclusion about the audit test.

A Type II error is the risk of incorrect acceptance.

The risk of incorrect acceptance relates to the

Auditing standards permit both statistical and nonstatistical methods of audit sampling.

For a particular audit,the sample size for testing controls over the revenue cycle is relatively large.What can you infer about the desired confidence level,the tolerable deviation rate,and the expected population deviation rate?