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Terminology

Population
Sample

sampling unit

Standard deviation

Basic precision

The range

Confidence interval
(Precision)

Sampling risk

random sample

Confidence level

(PPS) Probability-
Proportional -to- Size

Stratification
1..

Description 2..

is the group of items about which an auditor wishes to draw conclusions. 3..

is a subset of the population used to estimate the characteristic. 4..

is the item that is actually selected for examination. It is a subset of the population. 5..

it measures the degree of dispersion of items in a population about its mean.


is the range around the sample statistic that is expected to contain the true population parameter.

is the difference between the largest and smallest values in a sample. It is a crude measure of
variability but is not used to estimate population variability

is a synonym for precision. It is the range around a sample statistic that is expected to contain the
true population parameter
is determined by subtracting the expected error rate from the tolerable error rate in the population

is the possibility that engagement conclusions based on a sample may differ from those reached if
the test were applied to all items in the population ( is the risk that the sample selected does not
represent the population)

is one in which every item in the population has an equal and nonzero chance of being selected for
the sample

It is the percentage of times that repeated samples will be representative of the population from
which they are taken
PPS is primairly applicable in testing accounts balances and transactions for overstatements
PPS sample divides the population into sampling intervals and selects a logical sample from each
sampling interval

sperates a population into relatively homogenous groups to reduce the sample size by minimizing
the effect of variation of items
Mean & Median & Mode measures the cenrtal tendency on the population
Standard deviation measures variability on the population

Professional judgement is required for both statistical and non statistical sampling
Reliability affected by < Confidence level> & Precison affected by <Confidence interval,Allowance for sampling risk>
In attribute sample , confidence level is directly related and the precision is inversely related to sample size .

Types of Sampling Risk


Beta Risk Alpha Risk

Incorrect acceptance

Incorrect rejection
Based on the sample selected, Auditor concludes Based on the sample selected, Auditor
that internal control system is effective instead of cocludes that internal control system is not
not effective effective instead of effective

This risk relates to Audit effectiveness This risk relates to Audit efficiency