Sampling
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CPA Auditing and Attestation (AUD) › Sampling
For which of the following audit tests would an auditor most likely use attribute sampling?
Making an independent estimate of the amount of a LIFO inventory
Examining invoices in support of the valuation of fixed asset additions
Selecting accounts receivable for confirmation of account balances
Inspecting employee time cards for proper approval by supervisors
Explanation
Attribute sampling is used to test controls. Inspecting employee time cards for proper approval by supervisors is a test of controls. Controls often relate to authorization, validity, completeness, accuracy, classification, and proper period.
Stratification is defined as:
Dividing a population into sub populations
Reducing the amount of the sample size
Multiplying a population into alternate populations
Increasing the amount of the sample size
Explanation
In the concept of stratification, populations are divided into subsets. A probability sample is drawn from each group.
When conducting testing of various data areas during an audit, the auditor should uniformly use the same sample selection procedures for each testing unit.
True, when it facilitates the audit
False, the auditor should assess the best way of sampling each data set
True, only when the client advises this
False, there is a set procedure for how to proceed by the AICPA
Explanation
Each data set to be tested requires a customized well thought out sampling and testing approach that allows the auditor to examine testing areas properly.
“Non-sampling risk” is:
The auditor will choose an incorrect sample
The sample size is too large
The sample size is too small
Errors caused that are unrelated to the sample
Explanation
Non-sampling risk is unrelated to the sample itself. Typically, a non-sampling risk would involve the misapplication of audit procedures. This would be unrelated to the sample
In the case of sampling risk:
controls are more effective than they actually are
controls are less effective than they actually are
Both a and b
Neither a or b
Explanation
Both a and b are correct. This risk could be that controls are more effective than they actually are causing oversampling or less than they actually are causing under-sampling.
While performing a test of details during an audit, an auditor determined that the sample results supported the conclusion that the recorded account balance was materially misstated. It was in fact not materially misstated. This situation illustrates the risk of:
Assessing control risk too high
Incorrect rejection
Assessing control risk too low
Incorrect acceptance
Explanation
Erroneously concluding that an account balance is materially misstated is an example of incorrect rejection.