Auditing Accounting

The following questions concern the determination of the proper sample size in audit sampling using the following table.

1 2 3 4 5 6 7

ARO (in percent) 10 5 5 5 10 10 5

Ter 6 6 5 6 20 20 2

EPER (in percent) 2 2 2 2 8 2 0

population size 1,000 100,000 6,000 1,000 500 500 1,000.000

a. Assume that the initial sample size for column 1 using non statistical sampling is 90 items. For each of columns 2 through 7, use your judgement to decide the appropriate nonstatistcal sample size. In deciding each sample size, consider the effects of changes in each of the four factors ( ARO, YER, EPER, and population size) compared with column 1.

b. For each of the columns numbered 1 through 7, determine the initial sample size needed to satisfy the auditors requirements using attributes sampling from the appropriate part of table 15-8.

c. Using your understanding of the relationship between the following factors and sample size, state the effect on the initial sample ( increase or decrease) of changing each of the following factors while the other three are held constant:

(1) An increase in ARO

(2) An increase in the TER

(3) An increase in the EPER

(4) An increase in the population aize

d. Expalin why there is such a large difference in sample sizes for columns 3 and 6

e. Compare your answer in part C. with the result you determine in part part a. (non-statistical sampling) or part b. ( attributes sampling. Which of the four factors appears to have the greatness effect on the initial sample size? which one appears to have the least effect?

f. Why is the sample size called the initial size