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36 Cards in this Set
 Front
 Back
Why do we use statistical sampling?

to quantify risk
allows a measurement of degree of risk 

What are the 2 types of sampling?

Attribute sampling (tests of controls, compliance)
Variable sampling (substantive tests) 

Whats the first step in sampling?

Define the population


How many potential populations are there in a typical set of f/s?

almost infinite


What is the central limit theorem?

The arithmetic means of all the samples drawn from the population would form a perfect normal curve


What does "random" mean?

every item in population must have an equal chance of being selected
one place where auditor judgment (bias) may not exist 

What is systematic sampling?

randomly select a first item, and then select every Xth item after that
weak form of randomness, if population has any order, misleading results 

Whats the strongest form of randomness?

Get a random sample using a random number table


What does variability increase? And what does it require?

uncertainty, requires greater sample sizes


How do you get the arithmetic mean?

Audited sample value / sample size


How do you calculate precision?

# of Standard Deviations
x Standard error of the mean = X x Population size = Precision 

What are the 3 different estimation types?

Mean per unit estimation
Ratio estimation Difference estimation 

What does stratifying do?

Splits a highly variable population into 2 populations, reduces variablity in population
can use small sample size 

Why do you stratify?

reduce variability, and use small sample sizes


What is Alpha risk?

f/s are correct in reality
sample says material error, so you modify opinion unncessarily risk of incorrect rejection! 

What is Beta Risk?

f/s are incorrect in reality
sample says correct, fail to modify opinion risk of incorrect acceptance 

What is the relationship between variability and sample size?

Direct
Smaller the variability, smaller the sample size Greater the variability, larger the sample size 

What is the relationship between tolerable misstatement and sample size?

Inverse relationship
smaller the tolerable misstatement, the larger the sample size greater the tolerable misstatement, the smaller the sample size 

What is Alpha Risk in relation to Attribute sampling?

Internal control is effective
Sample says material weaknesses, so assess control risk too hight risk of underreliance, end up with too much substantive testing 

What is beta risk in relation to attribute sampling?

Internal control is not effective
Sample says no material weaknesses, assess control risk too low risk of overreliance, effect is too little substantive testing 

What is the relatinoship between expected deviation rate and sample size?

Direct
high expected deviation rate, high large sample low, small sample 

What is ther relationship between Tolerable Error Rate and sample size

INVERSE
high tolerable error, small sample low tolerable error, large sample 

What is Discovery Sampling?

type of attribute sampling
predetermined probability of discovering one item, use with critical items expect error rate to be very low 

What is PPS Sampling?

Probabilityproportionalto size
uses attribute sampling tables to assist in sampling variables 

How do you get a sampling interval?

Tolerable misstatement / reliability factor = sampling interval


How do you get a sample size?

Population value / Samplng interval = sample size


What are the advantages of PPS sampling?

easier than other methods
automatic stratification: larger value items have a higher chance to be selected sample size not affected by variability can start before entire population is available 

What are the 8 basic steps in any sampling plan?

1. Define the population
2. Choose method (meanperunit, difference, ratio, stratified) 3. Determine sample size, considering variable or attribute 4. Determine acceptable level of risk 5. Select the random sample 6. Audit the random sample 7. Evaluate the results 8. Document the procedures 

In performing tests of controls over authorization of cash disbursements, which of the following statistical sampling methods would be most appropriate? (variables, stratified, ratio, attributes)

Attributes
When performing tests of controls the auditor is looking for the deviation rate from established control procedures set by the client. For testing the controls, the auditor performs attributes sampling procedures 

Why would you use variable sampling?

Variable sampling is used by the auditor to estimate the total dollar amount of a population at auditorspecified levels of precision and reliability


Why would you use attribute sampling?

Attribute sampling provides evidence of the rate of occurrence of a specified characteristic in a population at auditorspecified levels of precision and reliability.


Why would you use discovery sampling?

Discovery sampling is a form of attribute sampling that is designed to locate at least one exception if the rate of occurrence in the population is at or above a specified rate. This method is used to search for critical occurrences that may indicate the existence of an irregularity, and is appropriate when the expected occurrence rate is quite low (usually near zero) and the auditor wants a sample that will provide a specified chance to observe one occurrence.


What is the principal advantage of statistical over nonstatistical sampling methods?

statistical methods provide a model for determining sample size while explicitly recognizing relevant factors (e.g. risk of assessing control risk too low, tolerable rate, and expected deviation rate). In nonstatistical sampling, the auditor implicitly recognizes the relevant factors while determining the sample size based on his or her own judgment and experience.


What is precision?

the range within which the sample result is expected to be accurate. Hence, it provides a calculation of the maximum acceptable error in either direction.


How do you calculate the sampling interval?

dividing the population into equal groups of dollars and selecting a logical unit from each group. Each group of dollars is a sampling interval


What are the 4 factors that affect sample size when using classic variables sampling?

(1) desired precision, (2) desired sample reliability, (3) variability among item values in the population (the estimate of the population's standard deviation) and (4) population size.
