# cpa audit review ch 15 review 1

 The flashcards below were created by user Joens1313 on FreezingBlue Flashcards. Is variables sampling a sampling method  used to estimate a numerical measurement of a population, such as a dollar value? Yes --- Variables sampling samples dollar amounts or other quantities. The purpose of variables sampling is to estimate a measure of a population. ------------ sampling is appropriate for account balances that may include a few overstated items, such as inventory and receivables. -------------sampling relies on an attribute sampling approach (Poisson distribution) to reach a conclusion regarding the probability of overstating an account balance by a specified amount of dollars monetary-unit sampling (MUS)  ---  MUS sampling is appropriate for account balances that may include a few overstated items, such as inventory and receivables. MUS sampling relies on an attribute sampling approach (Poisson distribution) to reach a conclusion regarding the probability of overstating an account balance by a specified amount of dollars An auditor is performing tests of details of pricing and extensions of perpetual inventory balances consisting of a large number of items. Past experience indicates numerous pricing and extension errors. What statistical sampling approaches is most appropriate? Ratio or difference estimation. Difference estimation of population misstatement involves (1) determining the differences between the audit and carrying amounts for items in the sample, (2) adding the differences, (3) calculating the mean difference, and (4) multiplying the mean by the number of items in the population. An allowance for sampling risk also is calculated. Ratio estimation is similar except that it estimates the population misstatement by multiplying the carrying amount of the population by the ratio of the total audit value of the sample items to their total carrying amount. It has been demonstrated that ratio or difference estimation is both reliable and efficient when small misstatements predominate and they are not skewed. An auditor is determining the sample size for an inventory observation using mean-per-unit estimation, which is a variables sampling plan. To calculate the required sample size, the auditor usually determines the Variability in the Dollar Amounts of Inventory Items Risk of Incorrect Rejection Four factors are considered in determining the sample size for mean-per-unit estimation. Those factors include (1) the population size, (2) an estimate of population variation (the standard deviation), (3) the risk of incorrect rejection (its complement is the confidence level), and (4) the tolerable misstatement (the desired allowance for sampling risk is a percentage thereof, and this percentage is a function of the risk of incorrect rejection and the allowable risk of incorrect acceptance). In planning a statistical sample for a test of controls, an auditor increased the expected population deviation rate from the prior year’s rate because of the results of the prior year’s tests of controls and the overall control environment. The auditor most likely would then increase the planned Sample size. To determine the sample size for a test of controls, the auditor considers (1) the tolerable rate of deviations, (2) the expected actual rate of deviations, and (3) the allowable risk of overreliance. An increase in the expected rate has the effect of increasing the degree of assurance to be provided by the sample and therefore increasing the planned sample size. AuthorJoens1313 ID277928 Card Setcpa audit review ch 15 review 1 Descriptioncpa audit review ch 15 review 1 Updated2014-07-01T03:49:22Z Show Answers