Statistical Sampling and Hypothesis Testing Flashcards
6 cards from real ADA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Statistical Sampling and Hypothesis Testing flashcards as text
Which statistical measure describes the spread of data values around the mean in an audit population?
Answer: Standard deviation
Standard deviation quantifies how dispersed individual data points are from the population mean, indicating variability.
In audit analytics, a confidence interval of 95% means:
Answer: If the sampling process were repeated, 95% of intervals would contain the true population parameter
A 95% confidence interval is a range constructed so that 95% of such intervals, under repeated sampling, would capture the true population value.
Which test would an auditor use to determine whether the distribution of a numeric field follows Benford's Law?
Answer: Chi-square goodness-of-fit test
The chi-square goodness-of-fit test compares observed digit frequencies to those expected under Benford's Law to detect anomalies.
Tolerable misstatement in a statistical audit sample represents:
Answer: The maximum error the auditor is willing to accept without modifying the opinion
Tolerable misstatement is the threshold below which errors would not affect the auditor's conclusions — it drives sample size calculations.
A two-tailed hypothesis test is used when the auditor wants to detect:
Answer: Deviations in either direction from the expected value
A two-tailed test checks for significant differences in either direction, making it suitable when both overstatement and understatement are of concern.
The risk of incorrect acceptance in audit sampling is most directly related to:
Answer: Type II error
The risk of incorrect acceptance — concluding the balance is fairly stated when it is not — corresponds to a Type II error (false negative).