Chapter 8
The objectives of attribute sampling when used for tests of controls are to ______.
- evaluate the operating effectiveness of the internal control for purposes of the internal control audit - determine the degree of reliance that can be placed on controls for a financial statement audit
If a large number of deviations are detected early in the tests of controls in the context of a financial statement audit, auditor options include ______.
-enhancing related substantive tests -relying on other internal controls -setting the control risk at the maximum for audit assertions affected
If 3 deviations are found in a sample of 60, the sample deviation rate is %.
5
If you examine a sample of 100 transactions and find 8 with errors, this suggests a transaction error rate of __________ %
8
Using a systemic selection approach to select a sample means ______.
a starting number is selected first and then every nth item is selected
A statistical sampling method used to estimate the proportion of a characteristic in a population is called _____ sampling.
attribute
Nonstatistical sample sizes are determined by ______.
audit firm policy applying professional judgment
Selecting and evaluating less than 100% of the items in an audit population is such a way that the auditor expects a representative group to provide a reasonable basis for conclusions about the population is ______.
audit sampling
The selection and evaluation of less than 100% of the items in a population that is expected to be representative of the population to provide a reasonable basis for a conclusion is the definition of _____ _____ .
audit smapling
If identified controls are operating effectively, control risk may be set ______.
below the maximum
Professional standards indicate that sample sizes for nonstatistical applications should be ______ sample sizes for statistical applications.
comparable to
In drawing a conclusion about the statistical sampling application for tests of controls, the auditor compares the tolerable deviation rate to the ______ deviation rate.
computed upper
Because the auditor does not know the true deviation rate, he or she calculates a ______
computed upper deviation rate
Understanding the nature and cause of a deviation helps the auditor better assess control risk and evaluate whether the deviations represent ______.
control deficiencies
If control risk is mistakenly set at a low level ______.
detection risk will be set too high
When analyzing deviations the auditor should ______.
determine if the deviation represents an unintentional error or fraud consider how the deviations may impact other phases of the audit
One of the most difficult step of an audit sampling application is generally ______.
determining the sample size
In setting the desired confidence level and acceptable level of risk, the auditor considers the ______.
difficulty or complexity in applying the control importance of the assertion significance of the account
In applying attribute sampling to tests of controls, the auditor normally attempts to determine the operating ______ of a control in terms of ______ from a prescribed internal control.
effectiveness; deviations
Systematic selection provides a sample where ______.
every sampling unit has an equal chance of being selected
If detection risk is set too high, the risk that the auditor will fail to detect an actual material misstatement ______.
increases
The primary purpose of sampling is to draw _____ about the whole population based on the results of testing only a subset of the population.
inferences
The sample size is ______ related to the tolerable deviation rate.
inversely
If the computed upper deviation rate is ______ the tolerable deviation rate, the auditor can conclude that the control tested can be relied upon.
less than or equal to
The ______ the tolerable deviation rate, the ______ the sample size.
lower; larger
Determining the sample size is typically one of the ______ steps of an audit sampling application.
most difficult
The two general approaches to audit sampling are _____ and _____.
nonstatistical statistical
Unrestricted random sampling without replacement means ______.
once an item is selected, it cannot be selected a second time
Random-number selection is used in many statistical sampling applications because the auditor is required to be able to measure the _____ of selecting the sampling units selected.
probability
Statistical sampling uses the laws of _____ to compute sample size and evaluate the sample results.
propability
The number of deviations found in the sample divided by the number of items in the sample is the ______ rate.
sample deviation
The computed upper deviation rate is the sum of the ______.
sample deviation rate and an appropriate allowance for sampling risk
Auditing standards recognize and permit both __________ and _________ methods of audit sampling.
statistical nonstatistical
If a large number of deviations are detected early in the tests of controls, the auditor should consider ______.
stopping the test as soon as it is clear that the results of the test will not support the planned assessed level of control risk
When the auditor has decided to rely on controls, the confidence level is set at 90 or 95 percent, meaning that the auditor is willing to accept a 10 or 5 percent risk of accepting ______.
the control as effective when in fact it is not
