Audit sampling involves applying an audit procedure to less than 100 percent of the population for the purpose of evaluating some characteristic of the population. When an auditor uses sampling, an element of uncertainty enters into the auditor's conclusions. Required: a. Explain the auditor's justification for accepting the uncertainties that are inherent in the sampling process. b. Discuss the uncertainties that collectively embody the concept of audit risk. c. Discuss the nature of sampling risk and nonsampling risk. Include the effect of sampling risk on tests of controls in terms of Type I and Type II errors.

Complete the statement.   The lower the risk of material misstatement,    a.   the greater the maximum tolerable misstatement   b. the higher the audit risk required.   c.   the later in the year that principal audit test procedures are performed   d.  the smaller the sample size needed for substantive testing

STATEMENT 1: Nonstatistical sampling approach is determined based on pure judgment of the auditor. STATEMENT 2: The maximum rate of deviation that would support the auditor's planned assessed level of control risk is the expected error rate. A. Only Statement 1 is incorrect B. Only Statement 1 is correct C. Both statements are incorrect D. Both statements are correct

What is “tolerable misstatement”? How is this concept applied when auditors perform audit tests on a sample?

STATEMENT 1: Since audit sampling is an essential part of the audit process, each step in an audit sampling application should be adequately planned. STATEMENT 2: No sampling method can provide the auditor with an absolute assurance that a particular sample is perfectly representative of the population. A. Only Statement 1 is incorrect B. Only Statement 1 is correct C. Both statements are incorrect D. Both statements are correct

Which of the following statements is not true with respect to the calculation of the upperlimit on misstatements?a. The tainting percentage is determined based on the difference between the recorded balance and the audited value.b. A separate incremental allowance for sampling risk is calculated for each misstatementdiscovered by the auditor.c. If no misstatements are detected, the basic allowance for sampling risk equals zero.d. The projected misstatement is determined by multiplying the sampling interval by thetainting percentage.

State with reasons (in short) whether the following statements are correct or incorrect (a) The terms of audit engagement can restrict the scope of an audit. · (b) It is the function of an audit to establish that payments have been made validly to the persons who are shown to be recipients. (c) Letter of Representations received from Management relieve the auditors of their responsibility. (d) Stratified sampling method involves dividing the whole population to be tested in a few separate groups. (e)  There is a very thin difference between advocacy threats and intimidation threats to an auditor while performing his duty

1a) Briefly discuss the advantages of using statistical sampling in auditing. 1b) Discuss three types of statistical sampling techniques.