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Sample risk, nonsampling risk, statistical sampling matching

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Below are statements or examples related to audit sampling applications. Indicate, using the correct letter, which concept is most closely associated with the statement or example. Each concept may be related to more than one statement or example.

A. Statistical sampling
B. Nonstatistical sampling
C. Sampling risk
D. Nonsampling risk.

___ 1. John CPA, selected all invoices over $1,000 and all invoices recorded on the 15th of each month for her sample.
___ 2. Christine, CPA, selected a sample and evaluated the results of his sample using the laws of probability.
___ 3. David CPA, checked to see if any signature was in the credit approval box on a sample of sales orders rather than looking for only authorized signatures.
___ 4. Based on a statistical sample, Benjamin, CPA, concluded the client's control was functioning effectively when the deviation rate in the population was actually unacceptable.
___ 5. When a client could not produce an invoice for a sample selected by the auditor, the auditor accepted the client's assurance that the invoice contained the appropriate approval.

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_B__ 1. John CPA, selected all invoices over $1,000 and all invoices recorded on the 15th of each month for her sample.

This is a "judgment" sample. That is, the auditor did not use statistical techniques to determine the sample size, select the sample, or measuring sampling risk.

_A__ 2. Christine, CPA, selected a sample and evaluated the results of his sample using the laws of probability.

Statistical sampling permit an auditor to reach a statistical conclusion about the population ...

Solution Summary

Your tutorial gives you a sentence or two to explain each choice, total of 161 words plus two references.

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Basic Sampling: a. What would you tell Reagan about the advantages and disadvantages of sampling? b. Reagan is interested in knowing the advantages and disadvantages of statistical sampling. What would you tell him? c. Reagan has heard about sampling and nonsampling risk and is concerned about these risks. 1. Define sampling and nonsampling risk.
2. How can Reagan control his exposure to sampling and nonsampling risk? 3. What are some possible examples of sampling and nonsampling risk in this situation?

E.54 Basic Sampling: Comprehensive. Reagan is considering opening a multipurpose hardware and lawn store in Anytown, USA. Based on his knowledge of the industry, he feels that if the average household income is greater than $35,000, the store will ultimately be successful. He was planning on attempting a census of the income levels in
Anytown, USA, but has heard about sampling and is now considering using sampling to
provide him with the necessary information to make his decision.
Required:
a. What would you tell Reagan about the advantages and disadvantages of sampling?

b. Reagan is interested in knowing the advantages and disadvantages of statistical sampling. What would you tell him?
c. Reagan has heard about sampling and nonsampling risk and is concerned about these risks.

1. Define sampling and nonsampling risk.
2. How can Reagan control his exposure to sampling and nonsampling risk?
3. What are some possible examples of sampling and nonsampling risk in this situation?

d. Assume that Reagan decided to use unrestricted random selection to select a sample of households for examination. If he determined a sample size of 100 households, describe how he could select the sample from the city's property tax rolls.

e. Instead of unrestricted random selection, Reagan asked you why he couldn't just pick four or five streets and examine all of the households residing on those streets. What would you tell him?

f. Assume that Reagan has set a desired sampling risk of 10 percent and found a sample estimate of $39,000 with a precision of $3,000. How would you explain the results to Reagan? What advice would you give to him?

g. Repeat (f) assuming that Reagan found a sample estimate of $42,000 and a precision of $10,000.

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