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Software

Attribute

A characteristic of the population of interest to the auditor.

Attributes sampling

A statistical sampling method used to estimate the rate of control

procedure failures based on selecting one sample and performing the

appropriate audit procedure.

Audit sampling

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.

Basic precision

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.

Block sampling

A sampling technique that involves selecting a sample that consists of

contiguous population items, such as selecting transactions by day or

week.

Expected misstatement

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.

Expected population deviation rate

An anticipation of the deviation rate in the entire population. Also

referred to as the expected failure rate.

Factual misstatements

Misstatements that have been specifically identified and about which

there is no doubt. Also referred to as known misstatements.

Generalized audit software (GAS)

Software programs designed specifically for auditors.

Haphazard sampling

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.

Incremental allowance for sampling risk

An increase in the total estimated misstatement caused by the

statistical properties of misstatements detected in the lower-stratum.

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Misstatement An error. For substantive sampling purposes. Risk of assessing control risk too high See risk of incorrect rejection of internal control reliability. The projected misstatement is calculated as the sampling interval multiplied by the tainting percentage. .CHAPTER 8 ∙ Specialized Audit Tools: Sampling and Generalized Audit 21 Software Logical unit The balance or transaction that includes the selected dollar in a monetary unit sample. Also see likely misstatement or most likely misstatement. a misstatement involves differences between recorded values and audited values. Population A group of transactions or the items that make up an account balance for which the auditor wants to estimate some characteristic. Nonsampling risk The risk that the auditor reaches an erroneous conclusion for any reason not related to sampling risk. that exists in a transaction or financial statement account balance. such as the effectiveness of a control procedure or estimate the extent of misstatement in an account. Probability proportional to size (PPS) sampling 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. Risk of assessing control risk too low See risk of incorrect acceptance of internal control reliability. Nonstatistical sampling The application of auditor judgment and experience in a sample application to assist the auditor in determining an appropriate sample size and in evaluating the sample results. Projected misstatement The best estimate of the actual amount of dollar misstatements in the population based on projecting the sample results to the population. either intentional or unintentional. Lower-stratum Items that are not in the top-stratum. but involving dollar misstatements rather than failure rates. MUS is often referred to as probability proportional to size (PPS) sampling. Monetary Unit Sampling (MUS) A sampling method based on attributes estimation sampling.

along with auditor judgment and experience. Statistical sampling The application of probability theory and statistical inference. Risk of underreliance See risk of incorrect rejection of internal control reliability. Risk of incorrect rejection of internal control reliability 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). document numbers such as an invoice or a purchase order. Risk of incorrect rejection of book value 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. in a sample application to assist the auditor in determining an appropriate sample size and in evaluating the sample results. Systematic random sampling 22 .CHAPTER 8 ∙ Specialized Audit Tools: Sampling and Generalized Audit Software Risk of incorrect acceptance of internal control reliability 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). Stratification Dividing the population into two or more subgroups. for example. Sampling units The individual items to be tested. Risk of incorrect acceptance of book value 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. Sampling risk 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. Risk of overreliance See risk of incorrect acceptance of internal control reliability. Simple random sampling Selecting a random sample by matching random numbers generated by a computer or selected from a random number table with.

The tainting percentage equals the amount of misstatement in the item divided by the item’s recorded amount. Tolerable misstatement A monetary amount set by the auditor in respect of which the auditor seeks to obtain an appropriate level of assurance that the monetary amount set by the auditor is not exceeded by the actual misstatement in the population.CHAPTER 8 ∙ Specialized Audit Tools: Sampling and Generalized Audit 23 Software This sampling technique involves systematic sampling in which the first item is selected randomly from the interval. Also referred to as the tolerable failure rate. 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. 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. . In practical terms. Systematic sampling This sampling technique involves dividing the number of physical units in the population by the sample size to determine a uniform interval. Tolerable rate of deviation 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. Tainting percentage The percentage of misstatement present in a logical unit. Top-stratum Population items whose book values exceed the sampling interval and are therefore all included in the sample. such as the sample item’s book value. The top-stratum consists of all account balances exceeding a specific dollar amount.

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