What is a key advantage of statistical sampling over Nonstatistical sampling?

Solutions for Chapter 8Problem 11MCQ: An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps an auditor toa. Eliminate the risk of nonsampling errors.

What is the difference between statistical and Nonstatistical sampling?

Statistical versus non-statistical sampling Statistical sampling allows each sampling unit to stand an equal chance of selection. The use of non-statistical sampling in audit sampling essentially removes this probability theory and is wholly dependent on the auditor’s judgment.

What are the advantages of using statistical audit sampling?

The critical advantage of statistical sampling are: it can offer a means of extrapolating errors, including implication of nil errors to the larger population in a quantitative and usually more reliable manner than would otherwise be possible.

What is a Nonstatistical sample?

Non-statistical sampling is the selection of a test group that is based on the examiner’s judgment, rather than a formal statistical method. For example, an examiner could use his own judgment to determine one or more of the following: The sample size.

What is the risk of incorrect rejection?

The risk of incorrect rejection is the risk that the sample supports the conclusion that the recorded account balance is materially misstated when it is not materially misstated.

Why is the auditor more concerned with the risk of overreliance than the risk of Underreliance?

increase the planned effectiveness of substantive procedures. Why is the auditor more concerned with the risk of overreliance rather than the risk of underreliance? The risk of overreliance may result in the auditor failing to perform sufficient substantive procedures.

What is statistical sampling and non-statistical sampling?

Statistical sampling is an approach to sampling that involves random selection of the sample items and the use of probability theory to evaluate the sample results, including the measurement of sampling risk. Any other approach is described as being ‘non-statistical’.

In which step of a sampling plan is non-statistical sampling different from statistical sampling?

The difference between the two types of sampling is that the sampling risk of a statistical plan can be measured and controlled, while even a perfectly designed nonstatistical plan cannot provide for the measurement of sampling risk.

What is the difference between a statistical question and a non-statistical question?

The first type is the statistical question. This is a question that has more than one possible answer. … The second type is the non-statistical question. This is the type of question that only has one answer.

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What are advantages of sampling?

Advantages of sampling. Sampling ensures convenience, collection of intensive and exhaustive data, suitability in limited resources and better rapport.

Why is statistical sampling important?

Statistical sampling can be a valuable tool to collect and evaluate information about a large population, or universe, when it would otherwise be impractical (or impossible) to collect that information from the entire population.

How statistical sampling enhances the quality of audit evidence?

Through statistical tools, the auditor can specify the audit risk he or she wants to run, and the sample size is a reflection of that risk. Thus, statistical sampling can help the auditor: in the definition of efficient samples; in determining the size of the sample; and in the evaluation of the results obtained.

Which of the following is a characteristic of Nonstatistical sampling?

Which of the following is a characteristic of nonstatistical sampling? It requires judgment to select a sample. … As a result of sampling procedures applied as tests of controls, an auditor incorrectly assesses control risk higher than appropriate.

Why do internal auditors sometimes choose to use Nonstatistical sampling instead of statistical sampling?

The primary reason for an internal auditor to use statistical sampling rather than nonstatistical sampling is to: … Obtain a sample more representative of the population than would be obtained if nonstatistical sampling techniques were used.

What is monetary sampling?

Monetary-unit sampling (MUS) is a method of statistical sampling used to assess the amount of monetary misstatement that may exist in an account balance. The method, also known as dollar-unit sampling or probability-proportional-to-size sampling, has been used for many years and is widely accepted among auditors.

What is an incorrect rejection?

The risk of incorrect rejection arises when a sample indicates that there is a risk of material misstatement when this is not actually the case. … This risk is a particular concern when the cost or difficulty of obtaining additional audit evidence is high.

How does tolerable error affect sample size?

Tolerable error is considered during the planning stage and, for substantive procedures, is related to the auditors’ judgment about materiality. The smaller the tolerable error, the larger is the sample size as a proportion of the population.

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What is statistical sampling in auditing?

Statistical audit sampling involves a sampling approach where the auditor utilizes statistical methods such as random sampling to select items to be verified. Random sampling is used when there are many items or transactions on record. … Using statistical sampling is recommended due to the high number of transactions.

Why does the risk of overreliance have an inverse relationship with sample size?

Why does the risk of overreliance have an inverse relationship with sample size? … As the level of control risk increases, the audit team is placing less reliance on internal control and can appropriately examine fewer items.

What is the primary drawback with respect to the use of sampling?

What is the primary drawback with respect to the use of sampling? The conclusion reached by examining a sample of items may differ from the conclusion that would be reached if the entire population were examined.

Which of the following is true with respect to the use of sequential sampling when used with attributes sampling?

Which of the following is true with respect to the use of sequential sampling when used with attributes sampling? Sequential sampling may provide a more efficient sample size than the use of traditional attributes sampling.

When Should non-statistical sampling be used?

Nonstatistical sampling may be used when results are needed to confirm a condition, or when judgment is more important than random sampling, such as in reviewing records, searching for unusual relationships, or interviewing client personnel (Guy, 1981a).

When using non-statistical sampling the sample must be a probabilistic one?

When using nonstatistical sampling, the sample must be a probabilistic one. The use of haphazard sample selection is encouraged under professional auditing standards. Directed sample selection, block sample selection, and haphazard sample selection are three types of probabilistic sample selection methods.

What is non-statistical in research?

: not of, relating to, based on, or employing the principles of statistics : not statistical a nonstatistical analysis Any sample where the sample items are not selected according to the laws of chance—that is, by probability sampling—is a nonstatistical sample.—

What are the advantages and disadvantages of non-statistical audit sampling?

The main advantages of audit sampling using non-statistical method are a statistically derived sample and a statistical evaluation of sampling risk. One of the disadvantages of non-statistical method includes the use of formal techniques to determine sample size, select the sample and to evaluate results.

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How is Judgement used in statistical and non-statistical sampling?

The auditor must use professional judgment to assess audit risk and establish appropriate procedures for the transactions and accounts tested. … Non-statistical sampling does not allow quantification of risk, leaving large margin of interpretation, exposing the auditor to a high risk of malpractice.

What is Nonsampling risk?

Nonsampling risk includes all the aspects of audit risk that are not due to sampling. An auditor may apply a procedure to all transactions or balances and still fail to detect a material misstatement.

How are statistical questions different from other questions?

A statistical question is one that can be answered by collecting data and where there will be variability in that data. This is different from a question that anticipates a deterministic answer. For example, How many minutes do 6th grade students typically spend on homework each week? is a statistical question.

What is a statistical question?

A statistical question is a question that can be answered by collecting data that vary. For example, “How old am I?” is not a statistical question, but “How old are the students in my school?” is a statistical question.

What is an example of a statistical question that results in numerical data?

But How tall are the students in your school? is a statistical question. When the answers to a statistical question are numerical data, we can ask about the central tendency of that data. For example, we might want to know, roughly, how tall are most people in your school? However, this is not a precise question.