Chapter 8 Specialized Audit Tools: Sampling And Generalized Audit Software

Front 1

Attribute

Back 1

A characteristic of the population of interest to the auditor

Front 2

Attributes sampling

Back 2

A statistical sampling method used to estimate the rate of control procedure failures based on selecting one sample and performing the appropriate audit procedure.

Front 3

Audit Sampling

Back 3

The application of an audit procedure to less than 100% of the items within an account balance or class of transactions for the purpose of evaluating some characteristic of the balance or class.

Front 4

Basic precision

Back 4

The amount of uncertainty associated with testing only a part of the population (sampling risk). Basic precision is calculated as the sampling interval multiplied by a confidence factor.

Front 5

Block sampling

Back 5

A sampling technique that involves selecting a sample that consists of contiguous population items, such as selecting transactions by day or week.

Front 6

Expected misstatement

Back 6

The level of misstatement that the auditor expects to detect, and it is based on projected misstatements in prior-year audits, results of other substantive tests, audit judgment, and knowledge of changes in personnel and the accounting system.

Front 7

Expected population deviation rate

Back 7

An anticipation of the deviation rate in the entire population. Also referred to as the expected failure rate.

Front 8

Factual misstatements

Back 8

Misstatements that have been specifically identified and about which there is no doubt. Also referred to as known misstatements

Front 9

Generalized audit software

Back 9

Software programs designed specifically for auditors.

Front 10

Haphazard sampling

Back 10

A nonstatistical sample selection method that attempts to approximate a random selection by selecting sampling units without any conscious bias, or special reason for including or omitting certain items from the sample.

Front 11

Incremental allowance for sampling risk

Back 11

an increase in the total estimated misstatement cause by the statistical properties of misstatements detected in the lower-stratum.

Front 12

Logical unit

Back 12

The balance or transaction that includes the selected dollar in a monetary unit sample.

Front 13

Lower-stratum

Back 13

Items that are not in the top-stratum (LOL THANKS)

Front 14

Misstatement

Back 14

An error, either intentional or unintentional, that exists in a transaction or financial statement account balance. For substantive sampling purposes, a misstatement involves differences between recorded values and audited values.

Front 15

Monetary Unit Sampling (MUS)

Back 15

A sampling method based on attributes estimation sampling, but involving dollar misstatements rather than failure rates. MUS is often referred to as probability proportional to size (PPS) sampling.

Front 16

Nonsampling risk

Back 16

The risk that the auditor reaches an erroneous conclusion for any reason not related to sampling risk.

Front 17

Nonstatistical sampling

Back 17

The application of auditor judgment and experience in a sample application to assist the auditor in determining an appropriate sample size and evaluating the sample results.

Front 18

Population

Back 18

A group of transactions or the items that make up an account balance for which the auditor wants to estimate some characteristic, such as the effectiveness of a control procedure or estimate the extent of misstatement in an account.

Front 19

Probability proportional to size (PPS) sampling

Back 19

A sampling selection method in which each item in the population has a probability of being included in the sample proportionate to the dollar value of the item.

Front 20

Projected misstatement

Back 20

The best estimate of the actual amount of dollar misstatements in the population based on projecting the sample results to the population. The projected misstatement is calculated as the sampling interval multiplied by the tainting percentage. Also see likely misstatement or most likely misstatement.

Front 21

Risk of incorrect acceptance of internal control reliability

Back 21

The risk that the auditor will conclude that the state of internal controls is effective when internal controls are actually not effective (also referred to as the risk of assessing control risk too low and risk of overreliance).

Front 22

Risk of incorrect rejection of internal control reliability

Back 22

The risk that the auditor will conclude that the state of internal controls is not effective when internal controls are actually effective (also referred to as the risk of assessing control risk too high and risk of underreliance).

Front 23

Risk of incorrect rejection of book value

Back 23

The risk that the auditor will conclude that the account balance contains a material misstatement when the account balance actually does not contain a material misstatement.

Front 24

Risk of incorrect acceptance of book value

Back 24

The risk that the auditor will conclude that the account balance does not contain a material misstatement when the account balance actually does contain a material misstatement.

Front 25

Sampling risk

Back 25

The risk that the auditor's conclusion based on a sample might be different from the conclusion he or she would reach if the test were applied in the same way to the entire population.

Front 26

Sampling units

Back 26

The individual items to be tested.

Front 27

Simple random sampling

Back 27

Selecting a random sample by matching random numbers generated by a computer or selected from a random number table with, for example, document numbers such as an invoice or a purchase order.

Front 28

Statistical sampling

Back 28

The application of probability theory and statistical inference, along with auditor judgment and experience, in a sample application to assist the auditor in determining an appropriate sample size and in evaluating the sample results.

Front 29

Stratification

Back 29

Dividing the population into two or more subgroups.

Front 30

Systematic random sampling

Back 30

This sampling technique involves systematic sampling in which the first item is selected randomly from the interval.

Front 31

Systematic sampling

Back 31

This sampling technique involves dividing the number of physical units in the population by the sample size to determine a uniform interval; a random starting point is selected in the first interval and one item is selected throughout the population at each of the uniform intervals after the starting point.

Front 32

Tainting percentage

Back 32

The percentage of misstatement present in a logical unit, such as the sample item's book value. The tainting percentage equals the amount of misstatement in the item divided by the item's recorded amount.

Front 33

Tolerable misstatement

Back 33

A monetary amount set by the auditor in respect of which the auditor seeks to obtain an appropriate level of assurance that monetary amount set by the auditor is not exceeded by the actual misstatement in the population. In practical terms, a tolerable misstatement is the maximum amount of misstatement the auditor can accept in the population without requiring an audit adjustment or a qualified audit opinion.

Front 34

Tolerable rate of deviation

Back 34

A rate of deviation set by the auditor in respect of which the auditor seeks to obtain an appropriate level of assurance that the rate of deviation set by the auditor is not exceeded by the actual rate of deviation in the population. Also referred to as the tolerable failure rate.

Front 35

Top-stratum

Back 35

Population items whose book values exceed the sampling interval and are therefore all included in the sample. The top-stratum consists of all account balances exceeding a specific dollar amount.