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# A5 - AUDITING 9"l f"f~,~ ~'l.~ 5 Sampling Government...

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2. Internal control communications , 22 5. Government auditing 59 6. Class questions 79 Management representations 55 Sampling, Government Auditing and Communications AUDITING 5 9"l f"!"f~,~ ......... ~"'l"".~ """'" 3. Communication with those charged with governance 50 4. 1. Audit sampling 3

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Becker Professional Education I CPA Exam Review Auditing 5 AUDIT SAMPLING I. INTRODUCTION A. Audit Sampling Audit sampling is the testing of less than 100% of the items within an account balance or class of transactions in order to evaluate some characteristic of the balance or class. Audit sampling Is especially useful in cases where an auditor has no special knowledge about likely misstatements contained in account balances and transactions. PASS KEY IlI!mII Always assume that the population being sampled is normally distributed, that is, it can be described by a "normal," or "bell-shaped," curve. IlI!mII For the estimates that the CPA makes about the population to have mathematical validity, the samples have to be unrestricted and randomly selected, which means that: 1. Every item in a population must have an absolutely equal chance of being selected. 2. The CPA cannot use "bias" in deciding which items will be selected. No substitute items may be used. I:I!JDEI If the sample is large enough and is randomly selected, the sample will likely have the same statistical characteristics (mean and standard deviation) as the underlying population, Le., it will be representative of the population. IlI!DI Standard deviation is a measure of "variability," which refers to the range of values within the population. B. Representative of the PopUlation When auditors sample from a population (universe), the assumption is that the sample is representative of the population (i.e., the characteristics of the sample are comparable to the characteristics of the popUlation). C. Sampling Risk Inherent in audit sampling is the concept of sampling risk. This is the risk that the sample is not representative and that the auditor's conclusion will be different from the conclusion had the auditor examined 100% of the popUlation. D. Sampling Audit sampling methods can be either statistical or nonstatistical. Both approaches require the use of professional judgment. 1. Statistical Sampling In statistical sampling, auditors specify the sampling risk they are willing to accept and then calculate the sample size that provides that degree of reliability. Resuits are evaluated quantitatively. ©2010 DeVry/Becker Educational Development Corp. All rights re~erved A5-3

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2. 3. Auditing 5 Becker Professional Education J CPA Exam Review Nonstatistical Sampling In nonstatistical sampling, the sample size is not determined mathematically. Auditors use their judgment in determining sample size, and sample results are evaluated jUdgmentally.
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A5 - AUDITING 9"l f"f~,~ ~'l.~ 5 Sampling Government...

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