125 STUDY UNIT FIVE SAMPLING (14 pages of outline) 5.1 Stetistical Concepts : ace pear) 5.2 Sampling.a Population... ah ogain it sean 129 : 5.3” “Attribute Sampling’ - f ss : 130 5.4 Variables Sampling .. 132 5.5. Sdlecting the Sampling Method : 134 5.6 Process Control Techniques... 3 134 This study unit is the first of three covering Section Ill: Condu Engagements ~ Audit Tools and Techniques from The IlA’s CIA’ up 25% to 35% of Part 1 of the CIA exam and is tested at the atl intemal Audit. *Syiabus. 7 iB'Bection makes Sptevel. Jie elevant portion We cover sampling and statistics in Study Unit Before choosing the correct data to gather, an intefa importantly, random sampling, Thus, Study Unit 5, “Sam and Data Analysis." r oa OUPinderstanding data. 3F Should un; id statistics and, more ¥ ae idy Unit 6, “Data Gathering TECHNIQUES 05% 35%) Pes he | BA starisTichQBoncePTs 1. Populations and Samples a. Sampling involves selecting representative items from a population (an entire group of items), examining those selected items, and drawing a conclusion about the population based on the results derived from the examination of the selected items. b. Auditors must draw conclusions about populations (invoices, accounts receivable, etc.) that are too numerous for every item to be tested 1) By applying the principles of statistics, auditors can test relatively small samples that allow them to draw conclusions about a population with measurable reliability 2) The main issue in sampling is choosing @ sample that is representative of the population. Valid conclusions then may be stated about the population.126 © SUS Sampling 2. Population Distributions a. For audit purposes, each item in a population is associated with a variable of interest to the auditor. 1) Discrete variables, such as the yes/no decision whether to authorize payments of invoices, are tested using attribute sampling (this is discussed in further detail in Subunit 5.3) 2) Continuous variables, such as the monetary amounts of accounts receivable, are tested using variables sampling (this is discussed in further det Subunit 5.4) b. An important characteristic of a population is the distribution variable of interest. 1) Ofthe many types of distributions, the most importagt (the bell curve), depicted in Figure 5-1 below. Its Valle bell-shaped curve centered around the meangsé 3, Measures of Central Tendency a. The shape, height, and width of a popul its measures of central tendency. 1@ ial ef oO 2) The median is the middle v. half the values are supe 50th percentile. 3) The mode is the mag mode exists. fata are arrangedn-numerical order. Thus, esha yal ee lars. ts the BocurinhHe. If all values are unique, no ¢ ‘Ar: irwestor has b, Ina normal distribution, the mean, median, and mode are the same, and the tails are identical. 1uOoE MEDIAN MEAN Figure 5-1SU 5: Sampling c, _Insome asymmetrical frequency distributions, the mean is greater than the mode. The right tail is longer, and the distribution is positively skewed 4 (to the right). 1) Accounting distributions tend to be skewed to the right. For instance, accounts receivable generally include many medium- and low-value items and a few | high-value items. <. _In'some asymmetrical frequency distributions, the median is greater than the mean. .The left tail is | longer. and the distribution is negatively skewed | (to the left) MeDian Figure 5-3 sy'16t many asymmetrical rot ny extremes. evel ey al Distributions extent to, the values of items are spread about is i the standard deviation. fins 1e following fixed relationships between the area ance from the mean. fations ‘Area under the Curve (Confidence Level) 58% 95% andra: Bae ((, standard seviation), 96.694 il be between 18 and 22 feet (2 sienard deviations 23 feet (3 standard deviations), eae . f.jepresenting 1 foot. ‘a hélobt between 79 and 21 fect 2d 99.7% wil be between 17 and, et om gk ain on | i— oe —| | }#—— 55% —___» Fooure 5.4