ugaudsampling - 11 1st Planning decisions = sample size...

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Unformatted text preview: 11 1st: Planning decisions = sample size, sampling method 2nd: Sampling involves risks: Type I and II errors 3rd: Detection Risk = Sampling & Non-sampling risk 4th: Statistical Sampling uses mathematical means to quantify sampling risk 5th: If using Stat. Sampling, our decision to follow a Test of Controls v. Substantive approach determines whether we use attributes sampling or variables sampling. The “BIG PICTURE” of Sampling 22 AR = IR X CR X DR Audit plan: Adjust the nature, timing and extent of audit tests Sampling Decisions (Extent): Sample Size Sampling Method A Review of Audit Planning Decisions 33 In tests of controls , sampling is used to support the assessed level of control risk (at below the maximum). For public companies, it is also used to identify control deficiencies in SOX testing. Sampling also relates to detection risk because sampling is used in substantive testing . 44 What affects Detection Risk? Sampling Risk : (Risk of Type I and Type II errors) occurs because of the nature of sampling; even a proper sample can fail to uncover material misstatements. 55 What types of auditor errors affect Detection Risk? Sampling Risk: Type I Errors: A udit efficiency is reduced Auditor erroneously thinks s/he found a problem . Type II Errors: A udit effectiveness is reduced Auditor erroneously thinks no problems exist. 66- Nonsampling risk results from auditor failure to recognize errors or exceptions or from the selection of ineffective or inappropriate procedures oops! What affects Detection Risk? 77 Stratified Sampling • Items in the population are divided into two or more subpopulations....
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This note was uploaded on 05/13/2011 for the course BUSACC 1238 taught by Professor Hoffman during the Spring '11 term at Pittsburgh.

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ugaudsampling - 11 1st Planning decisions = sample size...

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