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Cards In This Set
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Attributes sampling
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•Used to estimate the extent to which a characteristic (attribute) exists within a population
-used in tests of controls |
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Deviation conditions
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Estimate the rate at which internal control policies or procedures are not functioning as intended
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Tolerable rate of deviation
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Compare rate to some allowable rate
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1.Determine the objective of sampling
2.Define deviation conditions
3.Define the population
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Steps in Attributes sampling: planning
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4.Determine sample size
5.Select sample items
6.Measure sample items
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Steps in attributes sampling: performing
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= No. deviations ¸sample size
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Calculate sample rate of deviation in step 6
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Risk of overreliance
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Determines which table to use
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7.Evaluate sample results
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Steps in attributes sampling: evaluating
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Nonrepresentative sample
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Problem with sample rate of deviation is that it may result from a
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Overreliance
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•Need to “adjust”sample rate of deviation to control for the risk of ______
•Calculate an Upper Limit Rate of Deviation
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1- risk of overreliance prob that population rate of dev is <= ULRD
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Upper limit rate of deviation
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Risk of overreliance
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•There is a ___________ probability that the true population rate of deviation exceedsthe ULRD
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–Conclude that internal control is not functioning effectively
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•If ULRD > Tolerable rate of deviation:
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•Increase sample size in hopes of supporting planned level of control risk
•Increase level of control risk, leading to more effective substantive procedures (lower detection risk)
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Options if internal control is not functioning effectively
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•Increase sample size in hopes of supporting planned level of control risk
•Increase level of control risk, leading to more effective substantive procedures (lower detection risk)
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Options if internal control is not functioning effectively
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