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35 Cards in this Set

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achieved upper limit
the maximum likely control procedure failure rate in the population based on an attribute estimation sample
allowance for sampling error (precision)
a factor used in planning statistical samples that represents the precision required in the sample to keep sampling risk at the desired level, provides elbow room for the difference between sample misstatement projections and the actual, but unknown, misstatement in the population
attribute
a characteristic of the population of interest to the auditor, most often it is a control procedure but it could also be an operational aspect, such as promptly responding to customer inquiries
attribute estimation sampling
a statistical sampling method used to estimate the most likely and maximum rate of control procedure failures based on selecting and auditing one sample, most commonly used statistical methods to test controls
audit sampling
the application of an audit procedure to less than 100% of the items within an account balance or class of transactions for the purpose of evaluating some characteristic of the balance or class
basic precision
the upper misstatement limit when no misstatements are detected in a PPS sample, computed by multiplying the sampling interval by the reliability factor
classical variables sampling methods
the statistical sampling methods that are based on the normal curve and central limit theorem; mean per unit, ratio estimation, and difference estimation sampling
discovery sampling
a special case of attribute estimation sampling used to test for critical events such as potential fraud
error expansion factor
a factor used in determining the sampling interval/size for PPS sampling to provide for additional sampling error when some misstatement is expected
expected failure rate
the auditor's best estimate of the percentage of transactions processed for which the examined control procedure is not operating effectively
expected misstatement
the amount of misstatement that the auditor estimates is in the population
haphazard selection
selection of sample items with no conscious bias; not randomly based, and therefore cannot be used for statistical sampling
incremental allowance for sampling error
provision for additional sampling error when misstatements are detected in a PPS sample, factors are determined from tables derived from the underlying sampling distribution
misstatement
for substantive sampling purposes, the differences in recorded values and audited values resulting in a difference that affets the account total
most likely misstatement
in PPS sampling, the sum of the top-stratum misstatements and the projection of the lower-stratum misstatements, auditor's best estimate of the total misstatement in the population
nonsampling risk
the risk of improperly auditing sampled items or misjudging inherent or control risk
other substantive procedures risk (OSPR)
the risk that all of the substantive tests, other than the planned sampling test, will fail to detect a material misstatement. professional standards refer to OSPR as analytical procedures risk
population
the group of transactions or the items that make up an account balance for which the auditor wants to estimate some characteristic, such as the effectiveness of control procedures
precision
the spread, or difference, between the tolerable and expected control procedure failure rates. also known as allowance for sampling error
probability proportional to size PPS
sampling method based on attribute estimation sampling but involving dollar misstatements rather than failure rates, each item in the population has a probability of being included in the sample proportionate to the dollar value of the item, most effective when auditing for the overstatement of a population and when no or few misstatements are expected
random-based selection
sample selection methods in which each item in the population has an equal chance of being selected; only random-based samples can be statistically evaluated
reliability factors
factors related to the TD risk used to determine the sample interval/size for PPS sampling
risk of assessing control risk too low
the risk that the assessed level of control risk based on the sample is less than the true operating effectiveness of the controls, statistical risk
risk of incorrect acceptance
the risk of concluding from a sample that the book value is not materially misstated when in fact it is, sometimes referred to as a type II error, beta risk
sampling risk
the probability that a sample is not representative of the population, which can lead the auditor to the wrong conclusion about the population, composed of the four immediately preceding risks
sampling error
the possibility that the projected misstatement will differ from the actual, but unknown, misstatement in the population
sampling units
the individual auditable elements, as defined by the auditor, that constitute the population, such as customers' balances or individual unpaid invoices
statistical sampling
the application of probability theory and statistical inference in a sample application to assist the auditor in determining an appropriate sample size and in evaluating the sample results
stratification
dividing the population into relatively homogeneous groups called strata, can be performed judgmentally by the auditor but is most often performed with the assistance of generalized audit software to achieve optimum sampling efficiency
tainting percentage
in PPS sampling, the amount of misstatement as a percent of the sample item's book value, calculated individually for each sampled item
test of details risk
a synonym for the risk of incorrect acceptance, part of detection risk related to a sampling application
tolerable failure rate
the auditor's assessment of the maximum rate of control procedure failure that can occur and still allow the auditor to rely on the control
tolerable misstatement
the maximum amount of misstatement the auditor can accept in the population
top stratum
population items whose book values exceed the sampling interval and are therefore all included in the test. the top stratum consists of all account balances exceeding a specific dollar amount
upper misstatement limit
the maximum dollar overstatement that might exist in a population, given the sample errors noted, at the specified level of TD risk, =basic precision + most likely misstatement + incremental allowance for sampling error