L11 Notes_Part_3 - Type II, beta risk ) – in a test of...

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Objectives 1. Are we trying to obtain a fair representation of the population of errors? 2. Are we trying to confirm are assumptions? 3. Are we trying to impartially observe reality? 4. Are we looking for errors, fraud? (Go fishing where the fish are)
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Sampling Risk Sampling risk is the element of uncertainty that enters into the auditor’s conclusions anytime sampling is used. There are two types of sampling risk. Risk of incorrect rejection ( Type I, alpha risk ) – in a test of internal controls, it is the risk that the sample supports a conclusion that the control is not operating effectively when, in fact, it is operating effectively. Risk of incorrect acceptance (
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Unformatted text preview: Type II, beta risk ) – in a test of internal controls, it is the risk that the sample supports a conclusion that the control is operating effectively when, in fact, it is not operating effectively. Sample Unrepresentative. Why? Sampling error How do you reduce sampling error? -increase sample size -appropriate selection method (e.g., Dewey wins by landslide) Non-sampling auditor error the experience and competence of the auditor affect the persuasiveness of information just as the competence and trustworthiness of the client’s employees affect the company’s internal control. - ineffective audit procedures - failure to recognize errors...
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This note was uploaded on 10/05/2011 for the course ACG 5637 taught by Professor Monikacaushoulli during the Fall '08 term at University of Florida.

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L11 Notes_Part_3 - Type II, beta risk ) – in a test of...

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