Exam 11: Audit Sampling Concepts

When the auditor would like to improve the efficiency of the audit by focusing work on transactions that may be more subject to material error in a particular area of the population, the auditor will use

The overall objectives of the audit test must be stated in terms of the

To ensure that all the population items will be properly subjected to the sample selection process, the auditor should

The exception rate the auditor will permit in the population and still be willing to use the assessed level of control risk is called the

In performing a review of his client's cash disbursements, a public accountant uses systematic sampling with a random start. The primary disadvantage of systematic sampling is that population items

The most common method used for performing statistical tests of controls is

An underlying feature of the random-based selection of items is that each

In systematic selection, population size is divided by the number of sample items desired in order to determine the

Nonsampling errors occur when audit tests do not uncover existing exceptions in the

One of the ways to eliminate nonsampling risk is through

The auditor has selected a sequence of 200 payroll cheques to verify the numerical continuity of the cheque numbers. What type of sampling is the auditor doing?

Establishing the tolerable exception rate (TER) requires

Helen found that the expense reports were not properly approved while the senior accounts payable clerk was on vacation in July. Helen decided to perform a test of control on the authorization of expense reports for all the months except for July, which she will test substantively. Helen is allowed to do this because

The auditor is going to select a sample that is a statistical probabilistic method of sample evaluation that results in an estimate of the proportion of items in a population containing a characteristic or attribute of interest. The auditor is using what type of sampling?

An increase in the sample size has the effect of decreasing the sampling error if the

In attribute sampling, an advance estimate of the expected population exception rate is necessary to plan the appropriate sample size. The relationship of expected population exception rate (EPER) to sample size is

The auditing standards indicate that

When systematic sample selection is used, the first item is selected randomly and all other items are selected automatically. If the characteristic of interest is not distributed randomly in the population, the systematic selection creates the possibility of

You are analyzing the exceptions that arose after your control testing of credit limit approvals. There were four exceptions where credit had not been approved. One was for a customer that was subsequently placed on C.O.D. (cash on delivery), and three occurred while the business was in the middle of its busy season, processing three times more transactions than most other times of the year. The company's busy season normally lasts about two months. Required: A) What is an anomaly? B) Are any of the exceptions that you found anomalous? Why or why not? C) Provide an example of a credit approval testing exception that would be anomalous.

You have just been given the approval to conduct statistical sampling for the audit of capital assets acquisitions. Previously, this work was completed using a judgmental sample. Required: Explain the key areas where decisions need to be made when conducting audit work using a statistical sample.