dating horseshoes - Validating sampling plans

The use of statistics, however, will help auditors develop sample plans more efficiently and assess sample results more objectively than nonstatistical methods alone.Even a well-designed nonstatistical sample cannot measure the risk that the sample is not representative of the population - a distinct advantage of statistically based sampling plans.Each of the sales orders selected for audit must be randomly drawn to prevent bias in the sample results.

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updating amateur radio license - Validating sampling plans

Attribute sampling plans represent the most common statistical application used by internal auditors to test the effectiveness of controls and determine the rate of compliance with established criteria.

The results of these plans provide a statistical basis for the auditor to conclude whether the controls are functioning as intended, reflecting either control compliance or noncompliance - a binary (yes/no) proposition.

Each sales order becomes the sampling unit, and sales order credit approval represents the control attribute to be tested.

The auditor must consider four statistical parameters to determine an appropriate sample size to select for the planned control test: confidence level, expected deviation rate, tolerable rate, and population.

To calculate sample size, the auditor could use a variety of tools and techniques, including manual computations, statistical tables, and commercial software packages.

For the statistical parameters provided, a sample size of 103 sales orders would be needed based on the "Statistical Sample Sizes for Test of Controls" chart below.Confidence levels of 90 percent to 99 percent are common.A 95 percent confidence level means the auditor assumes the risk that five out of 100 samples will not reflect the true values in the population.The auditor's assessment of the control environment contributes to the level of risk the auditor is willing to assume.At a 95 percent confidence level, 5 percent — the complement of the confidence level — reflects the auditor's risk of "assessing control risk too low."The expected deviation rate represents the auditor's best estimate of the actual failure rate of a control in a population.Systematic selection - picking every sales order - is also acceptable if the first item sampled is randomly selected, though the results may be skewed if missing credit approvals occur in a systematic pattern.

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