Ch 3 - Mod 6 - Sampling Techniques

Question 1

What are the 4 assumptions in audit sampling?

Answer 1

Question 2

4 advantages of Stat Sampling

Answer 2

Question 3

When is Attribute Sampling used?

Answer 3

Question 4

When is Variable/PPS sampling used?

Answer 4

Question 5

What are some key characteristics of Attribute Sampling?

Answer 5

Question 6

What happens if an auditor mistakenly concludes controls are effective (low error rate in sample)?

Answer 6

Question 7

What happens if an auditor mistakenly concludes control are ineffective (high error rate in sample)?

Answer 7

Question 8

Variable Sampling / Probability-Proportional-to-Size (PPS) Sampling

Answer 8

Question 9

What are some key characteristics of Variable Sampling/PPS Sampling?

Answer 9

Question 10

What’s the risk of incorrect acceptance as it relates to Variable Sampling/PPS?

Answer 10

Question 11

Sample Chart

Answer 11

Question 12

Define Sample Risk

Answer 12

Sampling risk is the risk that the auditor’s conclusion based on a sample would be different
from the conclusion they would have reached if they had tested the entire population.

Question 12

Sample Size Increases When:

Answer 12

Question 13

Sample Size Decreases When:

Answer 13

Question 14

What is the tolerable deviation rate?

Answer 14

Question 15

What is the expected deviation rate?

Answer 15

Question 16

What is the relationship between expected deviation rate and tolerable rate? Why?

Answer 16

Why this relationship exists
Decision usefulness
If EDR ≥ TDR, the auditor already expects too many errors.
That means even before testing, the control is likely ineffective, so testing it is inefficient.
The auditor would instead not rely on the control and move to more substantive procedures.
Sampling logic
The closer EDR is to TDR, the larger the sample size needed.
Why? Because you need more evidence to confidently conclude the true rate is below the tolerable limit.
Audit efficiency
When EDR is much lower than TDR, fewer samples are needed → more efficient audit.
When EDR is close to TDR, uncertainty increases → more testing required.
Intuition (simple way to think about it)
* TDR = your “red line”
* EDR = your expectation of reality

If you already expect reality to be at or above the red line, there’s no point testing—you already know it likely fails.

Question 17

What is Mean-Per-Unit?

Answer 17

Question 18

What is a ratio estimate?

Answer 18

Question 19

What is a Difference estimation?

Answer 19

Question 20

Sample Size Formula

Answer 20

Question 21

Sample Size Formula Example

Answer 21

Question 22

PPS Factor is based off of 3 key things:

Answer 22