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22 Cards in this Set
- Front
- Back
Concepts of Sampling |
Sampling Risk Sampling Error Nonsampling Risk Tolerable Misstatement/Dev rate Expected Misstatement/Dev Rate Allowance for sampling risk Confiedence level |
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Sampling Risk |
Risk sample does not represent the pop Type I and Type II Errors |
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Explain the types of errors |
Type I: Incorrect Rejection - CR too low Type II: Incorrect acceptance - CR too high |
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Sampling Error |
Difference between actual error rate or misstatement amt in the pop |
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Nonsampling risk |
Auditor might select wrong procedure, might misapply correct procedure, or misinterpret results |
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Two types of sampling |
Statistical - Uses statistical theory, less judgement, known sampling risk Nonstateistical - Sampling risk estimated, more judgement, and based on theory & firm guidance |
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Control testing |
To determine if dev rate is too high Generally statistical Uses computers |
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Substantive testing |
Misstatement/acct value is too high Generally nonstatistical Requires judgement Careful of small sample sizes Consider sampling risk |
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Samplers must address |
How many/Sample Size Which ones/Sampling method How do I interpret results? |
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How many/Sampling Size |
Population Size Desired confidence level Margin of error/allowance for sampling risk |
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Confidence level |
How confident do I want to be that im right? Larger sample = more confidence |
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Allowance for sampling risk |
Tolerable Problems - Expected problems Smaller difference = more precise |
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Expected problems |
Can be based on historical data |
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Expected Misstatement/Dev rate |
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Which items |
Statistical Sampling = Every item has equal chance of being selected Nonstatisical Sampling = Random, Systematic, Haphazard, Judgemental |
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4 step approach to Interpreting results |
1. Sample in misstatement/deviation rate 2.Project to population 3. Consider sampling risk 4. Plausible vs tolerable (want a <) |
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Attribute Sampling |
IC testing Must define attribute being tested with support Small Sample size Low error rate(TE 5%, Expected error 0) Provides existence question! |
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Formula |
(Population BV/Margin of error)*Reliability factor |
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Steps for Sampling |
1. determine Test obj 2.Define: pop, missstatemen/deviation 3.Determine sample size 4. Select sample items 5. Preform auditing procedure 6. Calc projected misstatement 7. Conclude |
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Calculating results two methods |
Ratio Projection Difference Projection |
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Ratio Projection |
Take Ratio of misstatement and apply to population |
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Difference Projection |
Average misstatement applied to population |