Auditing-Answers to Ch08 - Ch08 Audit Sampling An Overview and Application to Tests of Controls Question 8-1 Audit Sampling The application of an audit

Auditing-Answers to Ch08 - Ch08 Audit Sampling An Overview...

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- 1 - Ch08: Audit Sampling: An Overview and Application to Tests of Controls Question 8-1: Audit Sampling: The application of an audit procedure to less than 100% of the items within an account balance or class of transactions for the purpose of evaluating some characteristic of the balance or class. Auditors sample instead of examining every transaction, because companies grew in sizes and complexity, and became uneconomical to examine all the accounting records and supporting documents Question 8-2: Type I Type II Meaning Deciding that the population is not acceptable when in reality it is Deciding that the population tested is acceptable when in reality it is not Terms used in test of controls Risk of underreliance Risk of overreliance Terms used in substantive tests Risk of material misstatement acceptance Risk of material misstatement rejection Costs when error occurred More audit work than necessary Failing to detect a material misstatement can lead to litigation against the auditor Question 8-3: Audit evidence types that do not involve sampling: 1. Analytical procedures 2. Scanning 3. Inquiry 4. Observation Question 8-4: Nonstatistcial sampling Statistical Sampling 1. Does not use statistical techniques to determine the sample size, select the sample, and measuring sampling risk Uses laws of probability to compute the sample size and evaluate the sample results. 2. Auditor must rely on his professional judgment. Most efficient sample size and quantify sampling risk 3. Most firms provide their auditors with nonstatistical sampling guidance Need additional costs & trained auditors
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  • Spring '16
  • deviation rate, upper deviation rate

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