Chapter_15_Solutions_Manual[1]

# Chapter_15_Solutions_Manual[1] - 1 Chapter 15 Audit...

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Unformatted text preview: 1 Chapter 15 Audit Sampling for Tests of Controls and Substantive Tests of Transactions Review Questions 15-1 A representative sample is one in which the characteristics of interest for the sample are approximately the same as for the population (that is, the sample accurately represents the total population). If the population contains significant misstatements, but the sample is practically free of misstatements, the sample is nonrepresentative, which is likely to result in an improper audit decision. The auditor can never know for sure whether he or she has a representative sample because the entire population is ordinarily not tested, but certain things, such as the use of random selection, can increase the likelihood of a representative sample. 15-2 Statistical sampling is the use of mathematical measurement techniques to calculate formal statistical results. The auditor therefore quantifies sampling risk when statistical sampling is used. In nonstatistical sampling, the auditor does not quantify sampling risk. Instead, conclusions are reached about populations on a more judgmental basis. For both statistical and nonstatistical methods, the three main parts are: 1. Plan the sample 2. Select the sample and perform the tests 3. Evaluate the results 15-3 In replacement sampling, an element in the population can be included in the sample more than once if the random number corresponding to that element is selected more than once. In nonreplacement sampling, an element can be included only once. If the random number corresponding to an element is selected more than once, it is simply treated as a discard the second time. Although both selection approaches are consistent with sound statistical theory, auditors rarely use replacement sampling; it seems more intuitively satisfying to auditors to include an item only once. 15-4 A simple random sample is one in which every possible combination of elements in the population has an equal chance of selection. Two methods of simple random selection are use of a random number table, and use of the computer to generate random numbers. Auditors most often use the computer to generate random numbers because it saves time, reduces the likelihood of error, and provides automatic documentation of the sample selected. 15-1 15-5 In systematic sampling, the auditor calculates an interval and then methodically selects the items for the sample based on the size of the interval. The interval is set by dividing the population size by the number of sample items desired. To select 35 numbers from a population of 1,750, the auditor divides 35 into 1,750 and gets an interval of 50. He or she then selects a random number between 0 and 49. Assume the auditor chooses 17. The first item is the number 17. The next is 67, then 117, 167, and so on....
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## This note was uploaded on 11/17/2010 for the course AC555 AC555 taught by Professor Tarbet during the Spring '10 term at Keller Graduate School of Management.

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Chapter_15_Solutions_Manual[1] - 1 Chapter 15 Audit...

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