Which of the following would most likely be an advantage in using classical variables sampling…Which of the following would most likely be an advantage in using classical variables sampling rather than monetary-unit sampling? Show
a. An estimate of the standard deviation of the population’s recorded amounts is not required. Don't use plagiarized sources. Get Your Custom Essay on Which of the following would most likely be an advantage in using classical variables sampling… Just from $13/Page b. The auditor rarely needs the assistance of a computer program to design an efficient sample. c. Inclusion of zero and negative balances generally does not require special design considerations. d. Any amount that is individually significant is automatically identified and selected. Jan 14 2017 10:02 AM Why dont you let a reliable essay writing service handle your assignments ?
The deviation rate in the auditor's sample is less than the tolerable rate, but the deviation rate in the population exceeds the tolerable rate.If the auditor has incorrectly assessed control risk lower than appropriate, the sample deviation rate must have been less than the actual rate and the actual population rate exceeds the tolerable rate. This would cause the auditor to accept the control as effective when it really was not and, thus, to assess control risk lower than appropriate.The sample size of a test of controls varies inversely withThe sample size of a test of controls varies inversely with the tolerable deviation rate. It varies directly with the expected population rate.In determining the number of documents to select for a test to obtain assurance that all sales returns have been properly authorized, an auditor should consider the tolerable rate of deviation from the control activity. The auditor should also consider theI. Likely rate of deviations.II. Allowable risk of assessing control risk too high.This is an audit sampling question for a test of controls. In order to correctly answer it, you must know the definitions for tolerable rate of deviation, likely rate of deviations, and allowable risk of assessing control risk too high. The tolerable rate of deviation is the "maximum rate of deviations from prescribed controls that would support (the auditor's) planned assessed level of control risk." In other words, this is the rate at which the control procedure was NOT applied.The likely rate of deviations is the expected population error rate. The allowable risk of assessing control risk too high is "the risk that the assessed level of control risk based on the sample is greater than the true operating effectiveness of the control." The auditor considers the tolerable rate of deviation, the likely rate of deviation, and the allowable risk of assessing control risk too LOW in determining sample size for a test of controls.Which of the following most likely would be an advantage in using classical variables sampling rather than probability-proportional-to-size (PPS) sampling?Inclusion of zero and negative balances generally does not require special design considerations.Because PPS sampling utilizes dollar units for sampling, the inclusion of zero and negative balances requires special design considerations. This would be an advantage for classical variables sampling, rather than PPS sampling.When using classical variables sampling for estimation, an auditor normally evaluates the sampling results by calculating the possible error in either direction.This statistical concept is known asPrecision.Classical sampling methods are based on the normal curve distribution. They calculate a "best estimate" of a population value and then provide confidence intervals around that estimate. The width of the confidence interval is the precision of the estimate, or the possible error in either direction.In a PPS sampling application, the sampling interval was $6,000. The auditor discovered that a selected account receivable having a recorded amount of $5,000 had an audit amount of $1,000. What was the projected error associated with this sample?$ 4,800When the recorded balance of the account involved is less than the sampling interval, the auditor must determine the "tainting" percentage and apply that percentage to the sampling interval. In this case the tainting percentage = [($5,000 − $1,000)/$5,000] = 80%. Accordingly, the projected misstatement is $6,000 × 80% = $4,800.When performing a substantive test of a random sample of cash disbursements, an auditor is supplied with a photocopy of vendor invoices supporting the disbursements for one particular vendor, rather than the original invoices. The auditor is told that the vendor's original invoices have been misplaced. What should the auditor do in response to this situation?Reevaluate the risk of fraud and design alternate tests for the related transactions.Fraud risk increases when copies of documents are provided instead of originals and more so when they are related to a single vendor, rather than multiple vendors. The auditor will need to obtain other evidence to support the transactions in question.Which of the following statements is correct concerning statistical sampling in tests of controls?Deviations from specific internal control procedures at a given rate ordinarily result in misstatements at a lower rate.Deviations from specific control activities at a given rate ordinarily result in misstatements at a lower rate because each failure to apply a control does not necessarily result in a misstatement.As a result of sampling procedures applied as tests of controls, an auditor incorrectly assesses control risk lower than appropriate.The most likely explanation for this situation is thatThe deviation rate in the auditor's sample is less than the tolerable rate, but the deviation rate in the population exceeds the tolerable rate.If the auditor has incorrectly assessed control risk lower than appropriate, the sample deviation rate must have been less than the actual rate and the actual population rate exceeds the tolerable rate. This would cause the auditor to accept the control as effective when it really was not and, thus, to assess control risk lower than appropriate.The use of the ratio estimation sampling technique is most effective whenThe calculated audit amounts are approximately proportional to the client's book amounts.Ratio estimation is most efficient when the differences are proportional to book values. If the calculated audit amounts are approximately proportional to the book amounts, a correlation exists between book values and the individual differences, and ratio estimation will be effective.Stratified mean per unit (MPU) sampling is a statistical technique that may be more efficient than unstratified MPU because it usuallyProduces an estimate that has a desired level of precision with a smaller sample size.Stratification of the population enables the auditor to separate the population into size-related classes. For example, all transactions over $50,000 may be grouped into a class. Applying MPU sampling to these strata or classes will then result in a higher level of precision for a smaller sample size.In statistical sampling methods used in substantive testing, an auditor most likely would stratify a population into meaningful groups ifThe population has highly variable recorded amounts.A population with highly variable recorded amounts will have amounts that cover a wide range. Stratifying such a population would involve separating the population into homogeneous groups based on size or other factors. In this manner, the auditor could select transactions to meet specific audit objectives and perform substantive procedures more efficiently. For example, the auditor could select all of the larger transactions over a specific dollar amount and a portion of the smaller transactions.Which of the following is the primary objective of probability proportional to sample size?To identify overstatement errors.PPS sampling is most effective in detecting overstatements, since the likelihood of an item's selection increases with the recorded magnitude of the item.What is an advantage in using classical variables sampling?Advantages: 1. When the auditor expects a large number of differences between book and audited values, classical variables sampling will normally result in a smaller sample size than monetary-unit sampling. 2. Classical variables sampling techniques are effective for both overstatements and understatements.
Which of the following most likely would be an advantage in using classical variable sampling rather than PPS sampling?Therefore, classical variables sampling would have an advantage over PPS sampling because variables sampling does not require special design considerations for inclusion of zero and negative balances.
What is classical variable sampling?Classical variables sampling is a statistical sampling method for estimating: the total audited value of an account or class of transactions. the total amount of monetary misstatement in an account or class of transactions.
Which of the following would be an improper technique when using monetary$6,000. Which of the following would be an improper technique when using monetary-unit statistical sampling in an audit of accounts receivable? Combining negative and positive dollar misstatements in the appraisal of a sample.
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