Exam 17: Audit Sampling for Tests of Details and Balances

Based on the information presented above, you are to indicate for the specified case from the table the required sample size to be selected from population 1 relative to the sample from population 2. In case 4, the required sample from population 1 is:

Match six of the terms (a-l) with the definitions provided below (1-6): a. Acceptable risk of incorrect acceptance b. Acceptable risk of incorrect rejection c. Difference estimation d. Misstatement bounds e. Monetary-unit sampling f. Mean-per-unit estimation g. Point estimate h. Probability proportional to size sample selection i. Ratio estimation j. Statistical inferences k. Stratified sampling l. Variable sampling ________ 1. Conclusions drawn from sample results based on knowledge of sampling distributions. ________ 2. Sampling techniques for tests of details that use the statistical inference processes. ________ 3. The risk that the auditor is willing to take of concluding a balance is materially misstated when it is, in fact, fairly stated. ________ 4. A statistical sampling method that provides upper and lower misstatement bounds expressed in monetary amounts. ________ 5. A method of variables sampling in which the auditor estimates the population misstatement by multiplying the average misstatement in the sample by the total number of population items and also calculates sampling risk. ________ 6. The risk that the auditor is willing to take of accepting a balance as correct when the true misstatement in the balance is greater than tolerable misstatement.

An auditor using nonstatistical sampling cannot:

The method used to measure the estimated total error amount in a population when there is both a recorded value and an audited value for each item in the sample is:

The sample size is inversely related to the computed precision interval in difference estimation; that is, as sample size increases, the computed precision interval decreases.

Explain the decision rule used with difference estimation sampling to determine whether the population is acceptable.

The primary factor affecting the auditor's decision about acceptable risk of incorrect acceptance (ARIA) is assessed inherent risk.

The statistical methods used to evaluate monetary-unit samples:

There are many kinds of statistical estimates that an auditor may find useful, but basically every accounting estimate is either of a quantity or of an error rate. The statistical terms that roughly correspond to "quantities" and "error rate," respectively, are:

Overstatement and understatement amounts are dealt with separately and then combined when generalizing from the sample to the population when applying monetary unit sampling (MUS).

The auditor must consider the possibility that the true population misstatement is greater than the amount of misstatement that is tolerable when the auditor is performing:

The two primary types of sampling methods used for calculating dollar misstatements are attribute sampling and monetary unit sampling.

When auditors apply MUS to a sample, the sample is selected using random sampling techniques.

Based on the information presented above, you are to indicate for the specified case from the table the required sample size to be selected from population 1 relative to the sample from population 2. In case 3, the required sample from population 1 is:

Sampling used for tests of details of balances provides results in terms of:

Which of the following does not need to be considered when the auditor generalizes from the sample to the population?

While performing a substantive test of details during an audit, the auditor determined that the sample results supported the conclusion that the recorded account balance was not materially misstated. It was, in fact, materially misstated. This situation illustrates the risk of:

Required sample size increases as the auditor's tolerable misstatement for an account balance or class of transactions decreases.

Both sampling and nonsampling risks are associated with:

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.