cpa audit review ch 15 review 7

  1. In a sampling application, the group of items about which the auditor wants to estimate some characteristic is called the

    The population is the group of items about which an auditor wishes to draw conclusions. However, the difference between the targeted population (the population about which information is desired) and the sampled population (the population from which the sample is actually drawn) should be understood.
  2. When using classical variables sampling for estimation, an auditor normally evaluates the sampling results by calculating the possible misstatement in either direction. This statistical concept is known as

    The precision or confidence interval (allowance for sampling risk) is an interval around the sample statistic that is expected to include the true value of the population at the specified confidence level. When using classical variables sampling, the allowance for sampling risk is calculated based on the normal distribution.
  3. In determining the number of documents to select for a test to obtain assurance that all sales returns have been properly authorized, an auditor should consider the tolerable rate of deviation from the control activity. The auditor should also directly consider the
    Likely rate of deviations

    The factors necessary to determine sample size in an attribute sampling plan for a large population include (1) the tolerable deviation rate, (2) the acceptable risk of overreliance, and (3) the expected deviation rate.
  4. Is the following statement true concerning statistical sampling in tests of controls?

    Deviations from specific control activities increase the likelihood of misstatements but do not always cause misstatements.
    true----Deviations from specific control activities increase the likelihood of misstatements but do not always cause misstatements.

    Deviations from a specific control increase the risk of misstatements in the accounting records but do not always result in misstatements. Thus, deviations from a specific control at a given rate ordinarily result in misstatements at the financial statement level at a lower rate.
  5. A CPA’s client wishes to determine inventory shrinkage by weighing a sample of inventory items. If a stratified random sample is to be drawn, the strata should be identified in such a way that
    Each stratum differs as much as possible with respect to expected shrinkage, but the shrinkages expected for items within each stratum are as close as possible.

    When the items in a population are heterogeneous, it may be advantageous to stratify the population into homogeneous subpopulations. Each stratum should differ from the others, but the items within each stratum should be similar.
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cpa audit review ch 15 review 7
cpa audit review ch 15 review 7