Topic 2

85問 • 1年前

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The auditor may decide to apply _____________ to an account balance or class of transactions. _______________ (sampling) involves the application of audit procedures to ______ than 100% of items within an account balance or class of transactions such that ______sampling units have a chance of selection

Audit Sampling, Audit Sampling, less, all

means the entire set of data from which a sample is selected and about which the auditor wishes to draw conclusions.

Population

For example, all of the items in an account balance or a class of transactions constitute a population. A ____________ may be divided into __________, or sub- populations, with each ____________ being examined separately. The term ____________is used to include the term ____________.

population, strata, stratum, population, stratum

means the individual items constituting a population, for example checkslisted on deposit slips, credit entries on bank statements, sales invoices or debtors’ balances, or a monetary unit.

Sampling Unit

means the documentary evidence which physically represents the sampling units in a given population.

Sampling Frame

the portion of the population that will be subjected to audit testing. The selected sample should be representative of the population.

Sample

means either control deviations, when performing tests of control, or misstatements, when performing substantive procedures.

Error

Error : means _________ control deviations, when performing ______________ , or misstatements, when performing ______________.

test of controla, substantive procedure

means the maximum error in a population that the auditor is willing to accept

Tolerable Error

Tolerable Error : means the ____________ error in a population that the auditor is willing to ________.

maximum, accept

is the process of dividing a population into subpopulations, each of whichis a group of sampling units which have similar characteristics (often monetary value).

Stratification

Stratificatio : is the process of ___________ a ______________ into subpopulations, each of whichis a group of sampling units which have _________ characteristics (often monetary value).

dividing, population, similar

Sampling is NOT involved in: 1. _______ examination; 2. ______________ testing; and 3. Audit procedures which either (1) have very ___________ purposes and provide only a ________ portion of the evidence needed to meet an audit objective or (2) intentionally ___________ a portion of the population such as: a. Performing a ____________ testt; b. Testing controls that leave _____ audit trail (such as observing client personnel as they perform internal control activities) ; c) Performing ________________.

100%, Selective, limited, small, exclude, walkthrough, no, analytical procedures

Advantages of sampling over complete (100%) verification 1. _______________ Sampling requires lesser time; audit would be completed on a more timely basis. 2.________________ Sampling can considerably reduce audit costs. 3. _______________ Sampling can provide valid conclusions that the sample reflects the same characteristics as the population.

Timeliness, Efficiency, Effectiveness

____________ and ______________can affect the components of audit risk.

sampling risk, non-sampling risk

Sampling risk arises from the possibility that the auditor’s conclusion, based on a ____________ may be ___________ from the conclusion reached if the entire _____________ were subjected to the ______ audit procedure.

sample, different, population, same

arises from the possibility that the auditor’s conclusion, based on a sample may be different from the conclusion reached if the entire population were subjected to the same audit procedure.

Sampling Risks

Nonsampling risk arises from factors that cause the auditor to reach an erroneous conclusion for any reason ______ related to the ______ of the sample such as: 1. Failure to select appropriate audit procedures 2. Failure to recognize errors in documents examined 3. Misinterpreting the results of audit tests

not, size

For both _____________ and _____________, ____________ can be reduced by increasing sample size, while _________________ can be reduced by proper engagement planning, supervision, and review.

tests of control, substantive tests, sampling risks, non-sampling risk

For both tests of control and substantive tests, sampling risk can be reduced by ____________ sample size, while non-sampling risk can be reduced by proper engagement planning, supervision, and review.

increasing

Sampling Risks: Tests of Controls

. Risks of under reliance 2. Risks of over reliance

Sample does not support the auditor’s planned degree of reliance on the control when true compliance rate supports such reliance.

Risk of under reliance

Also known as the risk of assessing control risk too high - the risk the auditor will conclude that control risk is higher than it actually is.

Risk of under-reliance

Sample supports the auditor’s planned degree of reliance on the control when true compliance rate does not justify such reliance.

Risk of over-reliance

Also known as the risk of assessing control risk too low - the risk the auditor will conclude that control risk is lower than it actually is.

Risk of Over-Reliance

Sampling Risks: Substantive Testing

1. Risk of incorrect Rejection 2. Risk of Incorrect Acceptance

he risk the auditor will conclude that a material error exists when in fact it does not

Risk of Incorrect Rejection

the risk the auditor will conclude that a material error does not exist when in fact it does.

Risk of Incorrect Rejection

Effect of sampling risk on audit

1. Efficiency 2. Effectiveness

The risk of under-reliance and the risk of incorrect rejection (both referred to as Alpha Risk) affect audit efficiency as it would usually lead to additional work to establish that initial conclusions were incorrect.

Efficiency

The risk of over-reliance and the risk of incorrect acceptance (both referred to as Beta Risk) affect audit effectiveness and is more likely to lead to an inappropriate audit opinion.

Effectiveness

approach to sampling that has the characteristics of: ◼ random selection of a sample; and ◼ use of probability theory to evaluate sample results, including measurement of sampling risk.

Statistical Sampling

General approaches to audit sampling.

a. Statistical Sampling b. Non-statistical Sampling

When applying __________________ the sample size can be determined using either probability theory or professional judgment.

statistical sampling

A sampling approach that does not have characteristics of statistical sampling.

Nonstatistical Sampling

Nonstatistical sampling – A sampling approach that _________ have characteristics of statistical sampling. Reasons for use – Often _______ costly and time-consuming to apply than statistical sampling, but can be as effective in achieving audit objectives.

does not, less

Similarities of Statistical Sampling and Nonstatistical Sampling Both statistical and nonstatistical sampling 1. Can provide ___________, competent evidential matter; 2. Involve judgment in planning, executing the sampling plan, and evaluating the sample results; 3. Require that sample item be selected in such a way that sample can be expected to be representative of the population.

suficient

The decision whether to use a statistical or non-statistical sampling approach is a matter for the auditor’s judgment regarding the most efficient manner to obtain sufficient appropriate audit evidence in the particular circumstances.

Choice of Approach

Choice of approach - The decision whether to use a statistical or non-statistical sampling approach is a matter for the auditor’s judgment regarding the most ___________ manner to obtain sufficient appropriate audit evidence in the particular circumstances.

efficient

______________ is not a valid criterion to distinguish between statistical and non-statistical approaches. __________ is a function of various factors. When circumstances are _________, the effect on sample size of certain factors will be ___________ regardless of whether a statistical or nonstatistical approach is chosen.

sample size, sample size, similar, similar

Sample Selection Methods Appropriate for statistical and nonstatistical sampling

1. Random Number Generator, 2. Systematic Selection

Sample Selection Methods Not appropriate for statistical sampling

1. Haphazard Selection, 2. Block Selection

in which the number of sampling units in the population is divided by the sample size to give a sampling interval, for example 50, and having determined a starting point within the first 50, each 50th sampling unit thereafter is selected.

Systematic Selection

In which the auditor selects the sample without following a structured technique. Although no structured technique is used, the auditor would nonetheless avoid any conscious bias or predictability (for example avoiding difficult to locate items, or always choosing or avoiding the first or last entries on a page) and thus attempt to ensure that all items in the population have a chance of selection.

Haphazard Selection

involves selecting a block(s) of contiguous items from within the population. Block selection cannot ordinarily be used in audit sampling because most populations are structured such that items in a sequence can be expected to have similar characteristics to each other, but different characteristics from items elsewhere in the population. Although in some circumstances it may be an appropriate audit procedure to examine a block of items, it would rarely be an appropriate sample selection technique when the auditor intends to draw valid inferences about the entire population based on the sample.

Block Selection

Usage of Sampling (Characteristic of Interest)The characteristic of interest depends on the type of test that will be performed on the sample selected.

1. Test of Controls, 2. Substantive Testing, 3. Dual-purpose tests

the characteristic of interest is the deviation or occurrence rate, which is the number of times a deviation from the prescribed internal control occurs in the sample.

Test of Controls

the characteristic of interest is the monetary amount of misstatement in an account balance.

Substantive Testing

Those in which a sample is used to test a control and to serve as a substantive test of a recorded balance or class of transactions. When a dual-purpose test is used, auditors select the sample size as the higher of that required for the two purposes.

Dual-Purpose Tests

a statistical sampling plan used in test of controls.

Attributes Sampling

a. Attributes sampling – a statistical sampling plan used in test of controls. This is appropriate: 1) When the auditor wishes to estimate the true but _____________ population deviation rate; 2) If the expected deviation rate is _______ based on prior experience.

unknown, high

a sampling plan used in substantive testing to estimate the total peso amount (or possibly units) of a population or the peso amount of an error in a population

Variables Sampling

An increase in the auditor’s intended reliance on accounting and internal control systems

Increase

An increase in the rate of deviation from the prescribed control procedure that the auditor is willing to accept (Tolerable deviation rate)

Decrease

An increase in the rate of deviation from the prescribed control procedure that the auditor expects to find in the population (Expected deviation rate)

Increase

An increase in the auditor’s required confidence level (or conversely, a decrease in the risk that the auditor will conclude that the control risk is lower than the actual control risk in the population – risk of assessing control risk too low)

Increase

An increase in the number of sampling units in the population

None

Other Sampling Techniques for Test of Controls

1. Sequential Sampling, 2. Discovery Sampling

the auditor tests a single plan, such as attribute estimation.

fixed sampling plan

the sampling is performed in several steps. Following each step, the auditor decides whether to stop testing or to go on to the next step.

Sequential Sampling Plan

plan can be used as an alternative to attribute estimation when an auditor expects zero or very few deviations within an audit population.

Sequential Sampling

Discovery sampling plan may be appropriate when: a. the audit objective is to observe at least _____ deviation at a specified critical rate; b. the expected population deviation rate is _______ zero; and c. the auditor desires a specified probability of observing at least ______ deviation of the actual population rate ____________s the critical rate (this is comparable to the tolerable rate in attribute estimation and sequential sampling).

one, near, one, exceeds

An increase in the auditor’s assessment of inherent risk

Increase

An increase in the auditor’s assessment of control risk (or a decrease in reliance on internal controls)

Increase

An increase in the use of other substantive procedures directed at the same financial statement assertion

Decrease

An increase in the auditor’s required confidence level (or conversely, a decrease in the risk that the auditor will conclude that a material error does not exist, when in fact it does exist – risk of incorrect acceptance)

Increase

An increase in the total error that the auditor is willing to accept (tolerable error)

Decrease

An increase in the amount of error the auditor expects to find in the population (expected error)

Increase

Stratification of the population when appropriate

Decrease

The number of sampling units in the population

None

Sampling techniques for Variables Sampling

Probability Proportional To Size Sampling, Classucal Variables Sampling

is a sampling technique that uses attribute sampling theory to evaluate the results when a large number of transactions are captured within a single account.

PPS Sampling

In _______________ sampling the auditor randomly selects individual pesos from a population and then audits the balances, transactions, or documents – called logical units – that include the pesos selected. Each peso in the population has an equal chance of being selected, but the likelihood of selecting any one logical unit for testing is directly proportional to its size.

PPS

_______________ sampling relies on normal distribution theory to evaluate audit samples.

Classical Variables

These may be appropriate when the audit objective is to estimate the true but unknown monetary balance. Kind of Sampling

Classical Variable Sampling

The three commonly used classical variables sampling techniques are:

1. Ratio Estimation, 2. Difference Estimation, 3. Mean-per-unit-estimation

uses the ratio of audited amounts to recorded amounts in the sample to estimate the total peso amount of the population (also called point estimate) and an allowance for sampling risk.

Ratio Estimation

The use of ____________ estimation is appropriate when the misstatement in an account is directly proportional to its book value.

ratio

Formula for Ratio Estimation :

SAV/SBV x PBV =EPAV +(-) sampling risk

uses the average difference between audited amounts and individual recorded amounts in the sample to estimate the total audited amount of the population and an allowance for sampling risk.

Difference Estimation

The use of _____________ estimation is more appropriate when the misstatement in an account is not affected by the book value of the item being examined.

Difference Estimation

Formula for Difference Estimation :

(SAV - SBV)/SS x P = Projected error

projects sample average (mean) to the total population by multiplying the sample average by the number of items in the population.

Mean per unit estimation

The use of _____________ estimation is appropriate when the individual population items do not have recorded values.

Mean per unit

Formula for Mean per unit estimation :

SAV/SS x P = EPAV +(-) sampling risk

Topic 1

Mikyii · 67問 · 1年前

Topic 1