Statistical Sampling and Hypothesis Testing Flashcards

In regression analysis used during an audit, the R-squared value indicates:

Answer: The proportion of variance in the dependent variable explained by the independent variable(s)

R-squared measures how well the independent variables explain the variability in the dependent variable, ranging from 0 to 1.

Which sampling approach is most appropriate when an auditor wants to evaluate the rate of control deviations?

Answer: Attribute sampling

Attribute sampling measures the proportion of items that have a specific characteristic, making it ideal for control deviation rate testing.

An auditor applies systematic sampling to a population of 5,000 invoices with a required sample of 100. After selecting a random start of 12, what is the next item selected?

Answer: 112

The sampling interval is 5,000 / 100 = 50, so the next item after 12 is 12 + 50 = 62. Wait — actually 12 + 50 = 62.

When an auditor identifies a statistically significant outlier in transaction data, the most appropriate next step is to:

Answer: Investigate the outlier to determine if it represents an error, fraud, or legitimate exception

Outliers warrant follow-up investigation to understand root cause before reaching a conclusion about their nature.

Which concept describes the maximum rate of control deviations the auditor will tolerate before concluding a control is ineffective?

Answer: Tolerable deviation rate

The tolerable deviation rate is the threshold the auditor sets in advance; if the upper deviation limit exceeds it, the control is deemed unreliable.

A null hypothesis for an analytical procedure states that account balance X equals the prior-year balance. The auditor would reject this hypothesis if:

Answer: The computed test statistic falls within the critical region

Rejecting the null hypothesis requires the test statistic to fall in the critical region, indicating the difference is statistically significant.