It is not necessary for a sample selection method to be easily replicated if the auditor is accepting the use of non-statistical audit plans.
True
False
True
An audit is successfully completed and will stand up to scrutiny even if all audit steps are completed without documentation of the steps performed and their results.
True
False
False
Performing a walk-through of a transaction through the accounting and control systems is a classic example of audit sampling.
True
False
False
It is always a better strategy to perform test of controls audit procedures at an interim date.
True
False
False
Risk of Incorrect Acceptance (RIA) and Analytical Procedures risk (APR) both combine to create Detection Risk.
True
False
True
Account balances can be substantively audited in full at an interim date. That is, no other substantive procedures are required from the interim date to year-end.
True
False
False
Audit work is completed and an opinion can be given without qualitative evaluation being performed.
True
False
False
analytical procedures risk (AP):
the probability that analytical procedures will fail to detect material errors.
attributes sampling:
another name for test of controls audit sampling.
audit of balances:
ordinary and extended substantive procedures designed to find signs of errors, irregularities and frauds in account balances and classes of transactions.
audit procedure (nature):
actions described as the general audit procedures of recalculation, physical observation, confirmation, verbal enquiry, document examination, scanning and analytical review.
block sampling:
choosing segments of contiguous transactions for a sampling application.
class of transactions:
a group of transactions having common characteristics, such as cash receipts or cash disbursements, but which are not simply added together and presented as an account balance in financial statements.
deviation:
(as in control failure, also error, occurrence and exception) refers to a departure from a prescribed internal control procedure in a particular case.
error:
(as in control failure, also deviation, occurrence and exception) refers to a departure from a prescribed internal control procedure in a particular case.
error analysis:
investigation of each deviation from a prescribed control procedure to determine its nature, cause and probable effect on financial statements.
exception:
(as in control failure, also deviation, error and occurrence) a departure from a prescribed internal control procedure in a particular case.
expectation about the population deviation rate:
an estimate of the ratio of the number of expected deviations to population size.
extending the audit conclusion:
performing substantive-purpose audit procedures on the transactions in the remaining period and on the year-end balance to produce sufficient competent evidence for a decision about the year-end balance.
extent:
(of audit procedures) refers to the amount of work done when the procedures are performed.
haphazard selection:
any unsystematic way of selecting sample units.
hypothesis testing:
auditors hypothesize that an account balance is materially accurate as to existence, ownership and valuation and test the hypothesis with sample-based evidence.
interim date:
a date some weeks or months before the auditee's fiscal year-end.
known misstatement:
the actual monetary error found in a sample.
likely misstatement:
the projected amount of misstatement in a population based on sample evidence.
nonsampling risk:
all risk other than sampling risk.
nonstatistical sampling:
audit sampling in which auditors do not utilize statistical calculations to express the results.
occurrence:
(as in control failure, also deviation, error, and exception) refers to a departure from a prescribed internal control procedure in a particular case.
overreliance:
(obsolete term) the result of assessing control risk too low and restricting other audit procedures when they actually should perform more work.
physical representation of the population:
auditor's frame of reference for selecting a sample.
population:
set of all the elements that constitute an account balance or class of transaction.
population unit:
one element in a population.
possible misstatement:
the further misstatement remaining undetected in units not selected in a sample.
problem-recognition:
(as an audit method phase) phase of formulating an audit objective related to a financial assertion.
random sample:
set of sampling units chosen so that each population item has an equal likelihood of being selected in a sample.
replication:
process of reperforming a selection procedure and getting the same sample units.
representative sample:
sample that mirrors the characteristics of the population.
risk of assessing the control risk too high:
probability that the test of controls (compliance) evidence in the sample indicates high control risk when the actual (but unknown) degree of compliance would justify a lower control risk assessment.
risk of assessing the control risk too low:
probability that the test of controls (compliance) evidence in the sample indicates low control risk when the actual (but unknown) degree of compliance does not justify such a low control risk assessment.
risk of incorrect acceptance (RIA):
probability that test of detail procedures will fail to detect material errors.
risk of incorrect rejection:
probability that test of detail procedures will indicate that a balance is materially misstated when, in fact, it is not.
sample:
set of sampling units.
sampling error:
amount by which a projected likely misstatement amount could differ from an actual (unknown) total as a result of the sample not being exactly representative.
sampling error-adjusted upper limit:
sample deviation rate adjusted upward to allow for the idea that the actual population rate could be higher.
sampling risk:
probability that an auditor's conclusion based on a sample might be different from the conclusions based on an audit of the entire population.
sampling unit:
one logical unit from a population, such as a customer's account, an inventory item, a debt issue, a cash receipt, a cancelled cheque and so forth.
skewness:
concentration of a large proportion of the dollar amount in an account in a small number of the population items.
standard deviation:
a measure of population variability.
statistical sampling:
audit sampling that uses the laws of probability for selecting and evaluating a sample from a population for the purpose of reaching a conclusion about the population.
stratification:
in relating to account balances and audit sampling, refers to subdividing a population.
substantive tests of details auditing:
performance of procedures to obtain direct evidence about the dollar amounts and disclosures in financial statements.
substantive-purpose audit program:
list of account balance- related procedures designed to produce evidence about assertions in financial statements.
systematic random sample:
random sample chosen by calculating a skip interval and selecting every kth population unit in a frame.
test of controls:
ordinary and extended procedures designed to produce evidence about the effectiveness of client controls that should be in operation.
timing:
(of audit procedures) refers to when procedures are performed: at "interim" before the balance sheet date, or at "year-end" shortly before and after the balance sheet date.
tolerable deviation rate:
decision criterion of the frequency of control failure for assessing control risk.
underreliance:
(obsolete term) the result of assessing control risk too high and expanding other audit procedures, performing more audit work when less work would suffice.
walk-through:
act of following one or a few transactions through the accounting system and control system in order to obtain a general understanding of the client's systems.
