Term

Definition
In the process of gathering evidence, the auditor uses sampling techniques because it is impossible to review 100% of the controls/transactions applied during the year 


Term
what kind of characteristics does representative sample has? 

Definition
representative sample has the same characteristics as the population from which the sample was taken 


Term

Definition
risk that material misstatements occur in the financial statements but the auditor does not detect them. 


Term
what are two types of audit risk? 

Definition
sampling risk and nonsampling risk
Audit risk = sampling risk + nonsampling risk 


Term

Definition
The risk that the sample is not representative of the population. For tests of controls, includes the risk of assessing control risk too high (which affects the efficiency of the audit); and the risk of assessing control risk too low (which affects the effectiveness of the audit) this can be reduced by larger samples 


Term
what is a nonsampling risk? 

Definition
other aspects of audit risk not related to sampling. e.g. using the wrong audit procedures to gather evidence, interpreting evidence incorrectly. 


Term
what is a statistical sample? 

Definition
a sample for which sampling risk can be calculated 


Term
what is a nonstatistical sample? 

Definition
a sample for which sampling risk cannot be calculated. 


Term
steps for judgmental sampling 

Definition
1.judgmentally determine sample size implicitly recognizing relevant factors 2. judgmentally select a representative sample 3. apply audit procedures 4. evaluate test results judgmentally 


Term
steps for statistical sampling 

Definition
1.determine sample size explicitly recognizing relevant factors 2.randomly select a representative sample 3.apply audit procedures 4.evaluate test results statistically using judgment 


Term
how do you control nonstatistical sampling risk? 

Definition
Selecting appropriate sample sizes (sampling risk decreases as sample size increases) Taking a random sample, so it is representative of the population Correctly evaluating sample results to consider sample risk (i.e. increase auditor compitence) 


Term
what does the auditor has to determine in attribute sampling? 

Definition
the auditor determines whether a characteristic of interest (attribute) in the population (the internal control) is present by looking at a sample from the population. 


Term

Definition
the tested control/transaction 


Term
what is deviation or error? 

Definition
an exception from the tested characteristic or a mistake in transaction 


Term
what is a tolerable deviation rate(TDR)? 

Definition
the deviation or mistake rate the auditor will permit and still be willing to conclude the process control is operating effectively. 


Term
steps for test of controls sampling plan 

Definition
Step 1 Describe the internal control being tested Step 2 Determine the control objectives including the relevant assertion Step 3 Define the population and the sampling unit Step 4 Define the deviation condition Step 5 Determine the desired level of assurance, the tolerable deviation rate, and the expected population deviation rate Step 6 Select method for determining sample size Step 7 Determine the method of sample selection Step 8 List the selected sample items Step 9 Describe how the sampling procedure was performed Step 10 Evaluate the sample results and make a decision 


Term
what is the decision rule in deciding acceptability of the population(attribute sampling)? 

Definition
SDR + allowance for sampling error <= TDR 


Term
when does deviation condition occurs? 

Definition
when there is no indication that the control has been performed. Defining the deviation before testing begins is important so that the auditor has a clear understanding of the conditions necessary for the control to be working. 


Term
what are desired level of assurance, deviation rate, and expected deviation? 

Definition
Desired Level of Assurance: 95% or 90%. sample size increases
Tolerable Deviation Rate: 220%. sample size decreases
Expected Rate of Deviation:015%. sample size increases 


Term
method of determining the sample risk? 

Definition
statistical or nonstatistical 


Term
what is simple random sampling? 

Definition
the auditor generates random numbers from a random number table then selects the document number corresponding to the random number generated 


Term
what is systematic random sampling? 

Definition
the auditor divides the number of units in the population by the number in the sample size to calculate a sampling interval and then generates a random number in the sampling interval. 


Term
what is haphazard sampling? 

Definition
the auditor selects the sample without any conscious bias. cannot be used for statistical sampling. 


Term
if the answer for "is the control working?" is "yes", what does the result indicate? 

Definition
Actual Control deviations + Allowance for sampling risk < Tolerable deviations
In this case, auditors would reduce the level of substantive testing based on their reliance on internal controls 


Term
if no, what does the result indicate? 

Definition
actual control deviation + allowance for sampling risk > tolerable deviations 


Term
when control is judged not effective, the auditor has options to... 

Definition
expand the sample size revise the assessed control risk upward(increase substantive test) consider implications for integrated audit reporting including classification as a material weakness or a significant deficiency 


Term
what is variables sampling? 

Definition
the use of sampling to test account balances and classes of transactions 


Term
is the account balance/class of transactions materially misstated? if yes... if no... 

Definition
yes: perform additional tests no: conclude that the relevant assertion for the account balance 


Term
steps for sampling plan for substantive tests of details 

Definition
Step 1 Describe the objectives of the test, the accounts, and the assertions affected Step 2 Define the population and the sampling unit Step 3 Define misstatement Step 4 Determine the desired level of assurance, the estimated misstatement and the tolerable misstatement Step 5 Select the method for determining sample size Step 6 Determine the method of sample selection Step 7 List the selected sample items Step 8 Describe how the sampling procedure was performed Step 9 Evaluate the sample results and make a decision 


Term
if projected misstatement + sampling risk <= tolerable misstatement, then 

Definition
the account balance/class of transactions is not materially misstated. 


Term
if projected misstatement + sampling risk > tolerable misstatement, then 

Definition
the account balance/class of transactions is materially misstated. 

