Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
20 Cards in this Set
- Front
- Back
|
For what kind of variables is variables sampling used for? |
continuous variables |
|
|
What is the objective in variables sampling? |
to estimate the dollar value of the population |
|
|
what kind of information does variables sampling provide? |
whether a stated amount (balance of account receivables) is materially misstated after the IA has specified a range that includes the true value at a specified confidence level |
|
|
which variables sampling techniques may be employed? |
- unstratified mean-per-unit (MPU) - stratified mean-per-unit - difference estimation - ratio estimation |
|
|
how does the mean-per-unit estimation method work, if a sample of 10 (out of 200) accounts with a recorded amount of $50 (total recorded amount is $2000) is audited, and based on the sample the total amount of the 10 accounts is $110? |
- average amount per sampled item: $110/10=$11 - estimated correct balance of the population: 200x$11=$2200 - then an achieved precision at the desired level of confidence is calculated |
|
|
What can be concluded if the sample was based on a 10% precision and a 95% confidence level? |
the probability is only 5% that the true total amount of the 200 accounts is outside the range of 2000 and 2400 |
|
|
What is a stratified MPU estimation? |
MPU estimation based on a group of items that was separated from the total population |
|
|
What is the stratified MPU good for? |
to increase audit efficiency by reducing the variability within each group and allowing for a smaller overall sample size |
|
|
When are the two MPU sampling methods most appropriate ? |
- when only a few errors in the population are expected |
|
|
how does the difference estimation method work, if a sample of 10 (out of 200) accounts with a recorded amount of $50 (total recorded amount is $2000) is audited, and based on the sample the total amount of the 10 accounts is $60? |
- average difference per account between the audited amount and recorded amount: ($60-$50)/10=$1 - estimated population error: $1x200=$200 - estimated correct balance: $2000+$200=$2200 |
|
|
how does the ratio estimation method work, if a sample of 10 (out of 200) accounts with a recorded amount of $50 (total recorded amount is $2000) is audited, and based on the sample the total amount of the 10 accounts is $60? |
- ratio of the audited amount and the recorded amount : $60/$50=1,2 - estimated correct balance: 1,2x$2000=$2400 |
|
|
When are difference estimation and ratio estimation useful? |
- when many small errors predominate and the errors are not skewed |
|
|
When is ratio estimation preferable to MPU? |
when the standard deviation of the distribution of ratios is less than the standard deviation of the sample item amounts |
|
|
When is ratio estimation preferable to difference estimation? |
when differences are proportional |
|
|
How does monetary-unit sampling (MUS) work? |
- the sampling unit is a unit of money rather than an invoice or an account - an item (invoice, account, etc.) containing the specific monetary unit is selected for testing |
|
|
How is MUS also called? |
probability-proportional-to-size (PPS) |
|
|
When is MUS appropriate? |
- when some items in account balances may be far larger (overstated) than others in the population - when only a few misstatements are expected |
|
|
When is MUS inefficient? |
when understatements and negative amounts are expected |
|
|
What may be the objective of MUS with regard to a total recorded amount of accounts receivable ($2000)? |
that is not overstated by more than 3% with a confidence level of 95% |
|
|
What does the application of the difference estimation and ratio estimation require? |
that the audit amounts of balances are proportional to the carrying amounts |
