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An Audit Partner Is Developing an Office Training Program to Familiarize

question 164

Multiple Choice

An audit partner is developing an office training program to familiarize his professional staff with statistical decision models applicable to the audit of dollar value balances. He wishes to demonstrate the relationship of sample sizes to population size and variability and the auditor's specifications as to tolerable misstatement and risk of incorrect acceptance. The partner prepared the following table to show comparative population characteristics and audit specifications of two populations. You are to indicate for the specified case from the above table the required sample size to be selected from population 1 relative to the sample from population 2. In case 1 the required sample size from population 1 is:

Grasp the concept of standard error and its relationship with sample size.

Recognize the role and definition of a population in sampling.

Understand specific sampling methods such as snowball/network sampling and stratified random sampling.

Comprehend the factors influencing sample size determination.

Definitions:

Equity Accounting

A method of accounting whereby an investor records its investment in an associate company at initial cost and subsequently adjusts the carrying amount for its share of the earnings and losses of the associate.

Reporting Entities

Organizations or entities that are required to prepare financial statements to provide information to external users such as investors, creditors, and regulatory agencies.

Control

The power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Significant Influence

The power to participate in the financial and operating policy decisions of an investee without having control or joint control over those policies.