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35 Cards in this Set
 Front
 Back
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 topstratum misstatements and the projection of the lowerstratum 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


randombased selection

sample selection methods in which each item in the population has an equal chance of being selected; only randombased 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
