auditing theory unit vi

7/22/2019 Auditing Theory UNIT VI

http://slidepdf.com/reader/full/auditing-theory-unit-vi 1/27

AUDITING THEORY UNIT VI – AUDIT SAMPLING

1. A sample in which the characteristics in the sample are the same as those of the

population is a (an)

a.

Random sampleb. Variables sample

c. Attributes sample

d. Representative sample

2. Non-sampling errors occur when audit tests do not uncover existing exception in the

a. Population

b. Sample

c. Planning stage

d. Financial statements

3. One of the causes of non-sampling error is

a. The use of inappropriate or ineffective audit procedures

b. Failure to draw a random sample

c. Failure to draw a representative sample

d. The use of attributes sampling instead of variables sampling

4. One of the ways to eliminate non-sampling risk is through

a. Proper supervision and instruction of the client’s employees.

b. Proper supervision and instruction of the audit team.

c. The use of attributes sampling rather than variables sampling

d. Controls which ensure that the sample drawn is random and representative.

5. Sampling risk (sampling error) is an inherent part of sampling that results from

a. Inappropriate audit procedures

b. Failure to recognize exceptions

c. Testing less than the entire population

d. Weaknesses in client’s internal control system

6. One of the ways to reduce sampling risk is to

a. Use an appropriate method of selecting sample items from the population.

b. Carefully design the audit procedures to be used.

c. Provide proper supervision and instruction of the audit team.

d. Use variables sampling rather than attribute sampling.



7. Which of the following statements is not correct?

a. It is acceptable for auditors to use statistical sampling methods.

b. It is acceptable for auditors to use non-statistical sampling methods.

c. The primary benefit of statistical sampling methods is the quantification of sampling

risk.d. An advantage of using statistical sampling is that the cost/benefit ratio is always

positive.

8. The most common method used of performing statistical tests of transactions is

a. Variables sampling.

b. Attribute sampling

c. Judgment sampling

d. Random selection of samples

9. Which of the following statements is a valid criticism of the use of non-statistical

sampling methods?

a. Many audit tests, such as footing of journals, must be performed outside a statistical

context.

b. The cost of performing random selection of testing often exceeds the benefits.

c. Non-statistical sampling does not differ substantially from statistical sampling

method.

d. Conclusions may be drawn in more precise ways when using statistical sampling

methods

10. Which of the following statements is not correct regarding probabilities and non-

probabilistic sample selection?

a. In probabilistic selection, every population item has a known chance of being

selected.

b. Probabilistic selection is required for all statistical sampling methods.

c. It is not acceptable to make non-statistical evaluations using probabilistic selection.

d. Both methods are acceptable and commonly used.

11. A sample in which every possible combination of items in the population has an

equal chance of constituting the sample is a

a. Representative sample

b. Statistical sample

c. Random sample

d. Judgment sample



12. Establishing a route through the random number table

a. Is an arbitrary decision.

b. Needs to be done in advance of choosing the numbers.

c. Is essential and the route must be followed consistently.

d.

Requires that all three of the above be true.

13. Correspondence is established between the random number table and the

population by

a. Identifying each item in the population with a unique number

b. Deciding the number of digits to use in the random number table and their

association with the population numbering system

c. Defining which digits the auditor uses in a column and the method of reading the

table.

d. Selecting a random starting point on the table.

14. Numbers drawn from a random number table which are outside the range of the

population are

a. Set aside and used to examine items of the population with a non-sampling method.

b. Used only if they represent high peso value items.

c. Recycled into the population of random numbers to be used again should they

appear a second time.

d. Discarded

15. Which of the following statements is not correct?

a. The only reason for selecting a random starting point on a random number table is

to eliminate the predictability of the sample.

b. It is acceptable to pick a starting point on a random number table by using a “blind

stab” method.

c. It is impossible to draw a six-digit random number from a table which is separated

into columns of five digits.

d. When selecting a three-digit number from a table which is separated into columns of

five digits, it is permissible to use the first three digits, the middle three digits, or the

last three digits.

16. Which of the following statements regarding documentation of the sample selection

process is not true?

a. Regardless of the method used in selecting a random sample, it is necessary to have

proper documentation.



b. When comparing statistical sampling to judgmental sampling, it is more important

that statistical sampling be properly documented because of its mathematical

nature.

c. Minimum documentation would include sufficient information to permit the

reproduction of the sample at a later date.d. For documentation, it is permissible for the auditor to include in the working papers

a copy of the table used, with the random numbers identified.

17. Which of the following statements regarding replacement and non-replacement

sampling is not true?

a. In replacement sampling, an element in the population will not be included in the

sample more than once.

b. In non-replacement sampling, an element in the population can be included in the

sample only once.

c. If the random number corresponding to an element is selected more than once in

non-replacement sampling, it is treated as a discard the second time.

d. Auditors rarely use replacement sampling.

18. Which of the following is not an advantage of using computerized selection of

random numbers over use of a random number table?

a. Time Saving.

b. Reduced likelihood of auditor error.

c. Automatic documentation

d. Correspondence of the numbers with the population is not required.

19. The process which requires the calculation of an interval and then selects the items

based on the size of the interval is

a. Statistical sampling.

b. Random selection

c. Systematic selection.

d. Computerized selection.

20. The advantage of systematic selection is

a. It is easy to use.

b. There is limited possibility of it being biased.

c. It is unnecessary to determine if the population is arranged randomly.

d. All three of the above.



21. Which of the following statements regarding block sampling is not true?

a. Block sampling is the selection of several items in sequence.

b. It is acceptable to use block sampling for tests of transaction only if a reasonable

number of blocks are used.

c.

A “reasonable number” for most situations is probably at least six blocks from sixdifferent months.

d. Once the first item in the block is selected, the remainder of the block is chosen

automatically.

22. When the auditor goes through a population and selects items for the sample

without regard to their size, source, or other distinguishing characteristics, it is called

a. Block selection

b. Haphazard selection

c. Systematic selection

d. Statistical selection

23. When the auditor intends to evaluate a sample statistically, the only acceptable

selection method is

a. Probabilistic selection

b. Judgmental selection

c. Haphazard selection

d. Block selection

24. A statistical method used to estimate the proportion of items in a population

containing a characteristic of interest is

a. Population proportional to size sampling.

b. Attributes sampling

c. Variables sampling

d. Estimation sampling

25. Since auditors are interested in the occurrence of exceptions in populations, they

refe to the occurrence rate as

a. The exceptions rate

b. The population’s rate.

c. The deviation rate

d. The confidence level.



26. If an auditor, without statistical sampling, selects a sample of one hundred items

from a population and finds two exceptions, the auditor

a. Can conclude that the sample deviation rate is 2 percent.

b. Can conclude that the population deviation rate is 2 percent.

c.

Can conclude the highest deviation rate expected in the population.d. Cannot make any conclusions about either the sample or the population.

27. A one-sided interval specifies

a. A CLDR only

b. A CUDR only

c. Both CLDR and CUDR.

d. Neither CLDR nor CUDR.

28. While attributes sampling is used primarily for tests of controls, auditors also use it

for

a. analytical review procedures.

b. tests of details of balances.

c. substantive tests of transaction.

d. all three of the above.

29. The risk which the auditor is willing to take of accepting a control as being effective

when it is not, is the

a. tolerable deviation rate.

b. acceptable risk of over-reliance.

c. estimated population deviation rate.

d. finite correction factor.

30. The deviation rate the auditor will permit in the population and still be willing to

reduce the assessed level of control risk is called the


b. estimated population deviation rate.

c. acceptable risk of over-reliance.

d. sample deviation rate.

31. The deviation rate the auditor expects to find in the population, before testing

begins, is called the


b. sample deviation rate.



c. computed upper deviation rate.

d. none of the above.

32. The effect of the finite correction factor on small population sizes is to

a. reduce the initial sample size.b. Increase the initial sample size

c. Either reduce or increase the initial sample size, depending on the circumstances of

the situation.

d. Increase the population size.

33. Unless a precise statement of what constitutes an attribute is made in advance, the

staff person who performs the audit procedure will have no guidelines.

a. To use when evaluating the results of analytical review procedures.

b. To determine what documents to obtain and review for the observation tests.

c. For identifying deviations.

d. For performing all three of the above.

34. Which of the following statements regarding the process of defining the population

is not correct?

a. The population represents the body of data about which the auditor wishes to

generalize.

b. The auditor can define the population to include whatever data is desired.

c. The auditor can randomly sample from whatever part of the population that he/she

chooses.

d. The auditor may generalize only about that population which has been sampled.

35. "Whenever a sample is taken, there is a risk that the quantitative conclusions about

the population will be incorrect."

a. This is always true.

b. This is always true unless 100 percent of the population is tested.

c. This is true for statistical sampling, but not for non-statistical sampling.

d. This is true for non-statistical sampling hut not for statistical sampling.

36. The risk of overreliance on internal control is a measure of the level of risk that

a. The auditor is willing to take.

b. Is predicted by the random number table.

c. Is predicted by the statistical frequency ledge of the true

d. Is generated as a result of the auditor’s population deviation rate.



37. If the auditor decides to assess control risk at the maximum level, tests of controls

are

a. Not performed.

b. Reduced in number.c. Increased in number.

d. unchanged from prior planned settings.

38. The initial sample size is so called because

a. The auditor must take several samples to ensure randomness.

b. The auditor must tale several samples to ensure that the final sample is

representative of the population.

c. The deviations must be evaluated before deciding whether the sample is sufficiently

large to achieve the objectives.

d. There is always another sample to be done.

39. Statistical theory proves that in most types of population to which attributes

sampling applies, the population size is

a. Not a consideration in determining sample size.

b. A minor consideration in determining n.

c. A major consideration in determining n.

d. The determining factor in establishing n.

40. The finite correction factor has the effect of significantly changing the sample size

only when

a. 5% or more of the population is included in the sample.

b. More than 10% of the population is included in the sample.

c. Greater than 5% but less than 10% of the population is included in the sample.

d. Less than 5% but greater than 10% of the population is included in the sample.

41. Of the four factors which determine the initial sample size (population size, tolerable

deviation rate, acceptable risk of overreliance, and expected population deviation

rate),a combination of two factors has the greatest effect on sample size.

a. Population size times expected population deviation rate.

b. expected population deviation rate plus acceptable risk of overreliance.

c. tolerable deviation rate minus expected population deviation rate.

d. acceptable risk of overreliance minus tolerable deviation rate.



42. The sample deviation rate equals

a. The number of deviation in the population divided by the sample size.

b. The number of items in the population multiplied by the number of deviations in the

sample.

c. The number of deviations in the sample divided by the sample size.d. The number of deviations in the population divided by the population size.

43. Which of the following statements is not true?

a. Random selection is statistical measurement.

b. It is acceptable to use random selection procedures without drawing statistical

conclusions.

c. It would be in appropriate to draw a statistical conclusion unless the samples were

randomly selected.

d. Random selection is a part of statistical sampling.

44. An auditor who uses statistical sampling for attributes in testing internal controls

should increase the assessed 1-evef of control risk when the

a. Sample rate of deviation is less than the expected rate of deviation used in planning

the sample.

b. Tolerable rate less than allowance for sampling risk exceeds the sample rate of

deviation.

c. Sample rate of deviation plus the allowance for sampling risk exceeds the tolerable

rate.

d. Sample rate of deviation plus the allowance for sampling risk equals the tolerable

rate.

45. Which of the following factors is generally not considered in determining “n” for a

test of controls?

a. Population size.

b. Tolerable rate

c. Risk of assessing control risk too low.

d. Expected population deviation rate.

46. An advantage of using statistical over non-statistical sampling methods in tests of

controls is that the statistical methods

a. Afford greater assurance than a non-statistical sample of equal size.

b. Provide an objective basis for quantitatively evaluating sample risks.



c. Can more easily convert the sample into a dual-purpose test useful for

substantive testing.

d. Eliminate the need to use judgment in determining appropriate sample sizes.

47. A principal advantage of statistical methods of attribute sampling over non-statistical methods is that they provide a scientific basis for planning the

a. Risk of assessing control risk too low.

b. Tolerable rate.

c. Expected population deviation rate.

d. Sample size

48. An auditor selects a sample from the file of shipping documents to determine

whether invoices were prepared. This tests is performed to satisfy the audit

objective of

a. Accuracy

b. Completeness.

c. Control

d. Existence

49. To determine whether the internal control structure operated effectively to

minimize errors of failure to invoice a shipment, the auditor would select a sample

of transactions from the population represented by the

a. customer order file.

b. bill of lading file.

c. open invoice file.

d. sales invoice file.

50. In attribute sampling, a 10 percent change in which of the following factors normally

will have the least effect on the size of the statistical sample?

a. Population size.

b. Tolerable deviation rate.

c. Acceptable risk of over reliance.

d. Standard deviation.

51. If the result obtained from a particular sample will be critical (that is, the auditor

would not be able to render an unqualified opinion unless every item in the



population were examined), which of the following is the most important to the

auditor?

a. Size of the population.

b. Estimated population deviation rate.

c. Tolerable deviation rate.d. Acceptable risk of over reliance.

52. Which of the following need to be known to evaluate the results of a sample for a

particular attribute?

a. Deviation rate in the sample.

b. Size of the sample.

c. Acceptable risk of over reliance.

d. Deviations in the sample.

53. A CPA examining inventory may appropriately apply sampling for attributes in order

to estimate the

a. Average price of inventory items.

b. Percentage of slow-moving inventory items.

c. Peso value of inventory.

d. Physical quantity of inventory items

54. If the size of the sample to be used in a particular test of attributes has not been

determined by using statistical concepts, but the sample has been chosen in

accordance with random selection procedures.

a. No inferences can be drawn from the sample

b. The auditor has committed a nonsampling error.

c. The auditor may or may not achieve the tolerable deviation rate at the acceptable

risk of over reliance.

d. The auditor will have to evaluate the results by reference to the principles of

discovery sampling.

55. In estimation sampling for attributes, which one of the following must be known in

order to appraise the results of the auditor’s sample?

a. Estimated peso value of the population.

b. Standard deviation of the values in the population.

c. Actual deviation rate of the attribute in the population.

d. Sample size.



56. Auditors who prefer statistical to non-statistical sampling believe that the principal

advantage of statistical sampling flows from its unique ability to

a. Define the precision required to provide audit satisfaction.

b. Provide a mathematical measurement of uncertainty

c. Establish conclusive audit evidence with decreased audit effort.d. Promote a more legally defensible procedural approach.

57. If an auditor, planning to use statistical sampling, is concerned with the number of a

client's sales invoices that contain mathematical errors, the auditor would most likely

utilize

a. random sampling with replacement.

b. sampling for attributes.

c. sampling for variables.

d. stratified random sampling.

58. Which of the following best describes the distinguishing feature of statistical

sampling?

a. It requires the examination of a smaller number of supporting documents.

b. It provides a means for measuring, mathematically, the degree of uncertainty

that results from examining only part of a population.

c. It reduces the problems associated with the auditor's judgment concerning

materiality.

d. It is evaluated in terms of two parameters: statistical mean and random

selection.

59. Which of the following is an advantage of systematic sampling over random number

sampling?

a. It provides a stronger basis for statistical conclusions.

b. It enables the auditor to use the more efficient "sampling with replacement"

tables.

c. There may be correlation between the location of items in the population, the

feature of sampling interest, and the sampling interval.

d. It does not require establishment of correspondence between random numbers

and items in the population.



60. When using statistical sampling for tests of compliance, an auditor’s evaluation of

compliance would include a statistical conclusion concerning whether

a. Procedural deviations in the population were within an acceptable range.

b. Monetary precision is in excess of a certain pre-determined amount.c. The population is not in error by more than a fixed amount.

d. Population characteristics occur at least once in the population.

61. In performing a review of his client’s cash disbursements, a CPA uses systematic

sampling with a random start. The primary disadvantage of systematic sampling is that

population items

a. Must be recorded in a systematic pattern before the sample can be drawn.

b. May occur in a systematic pattern, thus negating the randomness of the sample.

c. May occur twice in the sample

d. Must be replaced in the population after sampling to permit valid statistical

inference.

62. The purpose of tests for compliance is to provide reasonable assurance that the

accounting control procedures are being applied as prescribed. The sampling method

that is most useful when testing for compliance is

a. Judgment sampling.

b. Attribute sampling.

c. Unrestricted random sampling with replacement.

d. Stratified random sampling.

63. An example of sampling for attributes would be estimating the

a. Quantity of specific inventory items.

b. Probability of losing a patent infringement case.

c. Percentage of overdue accounts receivable.

d. Peso value of accounts receivable.

64. Which of the following best describes what the auditor means by the rate of

occurrence in the attribute sampling plan?

a. The number of errors that can reasonably be expected to be found in a

population.

b. The frequency with which a certain characteristic occurs within a population.

c. The degree of confidence that the sample is representative of the population.

d. The peso range within which the true population total can be expected to fall.



65. When performing a compliance test with respect to control over cash

disbursements, a CPA may use a systematic sampling technique with a start at any

randomly selected item. The biggest disadvantage of this type of sampling is that the

items in the population

a. must be recorded in a systematic pattern before the sample can be drawn.b. may occur in a systematic pattern, thus destroying the sample randomness.

c. may systematically occur more than once in the sample.

d. must be systematically replaced in the population after sampling.

66. Which of the following statistical selection techniques is least desirable for use by an

auditor?

a. Systematic selection.

b. Stratified selection.

c. Block selection.

d. Sequential selection.

67. An advantage of using statistical sampling techniques is that such techniques

a. mathematically measure risk.

b. eliminate the need for judgmental decisions.

c. Define the values of precision and reliability required to provide audit

satisfaction.

d. Have been established in the courts to be superior to judgmental sampling.

68. Which of the following best illustrates the concept of sampling risk?

a. A randomly chosen sample may not be representative of the population as a

whole on the characteristics of interest.

b. An auditor may select audit procedures that are not appropriate to achieve the

specific objective.

c. An auditor may fail to recognize errors in the documents examined for the

chosen sample.

d. The documents related to the chosen sample may not be available for

inspection.



69. Statistical sampling generally may be applied to test compliance with internal

accounting control when the client's internal accounting control procedures

a. depend primarily on appropriate segregation of duties.

b. are carefully reduced to writing and are included in client accounting manuals.

c. leave an audit trail in the form of documentary evidence of compliance.d. enable the detection of material irregularities in the accounting records.

70. The estimated error rate obtained from attribute sampling is most useful in

satisfying the auditing standard which states.

a. The work is to be adequately planned, and assistants, if any, are to properly

supervised.

b. Sufficient competent evidential matter is to be obtained through inspection,

observation, inquiries, and confirmations to afford a reasonable basis for an

opinion.

c. the examination is to be performed by a person or persons having adequate

technical training and proficiency as an auditor.

d. there is to be a proper study and evaluation of the existing internal control as a

basis for reliance thereon and for the determination of its resultant extent of

the tests to which auditing procedures are to be restricted.

71. The tolerable rate of deviations for a compliance test is generally

a. lower than the expected rate of errors in the related accounting records.

b. higher than the expected rate of errors in the related accounting records.

c. identical to the expected rate of errors in the related accounting records.

d. unrelated to the expected rate of errors in the related accounting records.

72. If certain forms are not consecutively numbered

a. selection of a random sample probably is not possible.

b. systematic sampling may be appropriate.

c. stratified sampling should be used.

d. random number tables can not be used.

73. When using a statistical sampling plan, the auditor would probably require a smaller

sample if the

a. population increases.

b. desired precision interval narrows

c. desired reliability decreases.

d. expected error occurrence rate increases.



74. Which of the following is not a type of statistical method that provides results in

dollar terms?

a. attribute sampling.

b. peso-unit sampling

c. variables sampling.d. sampling with probability proportional to size.

75. When auditors sample for tests of details of balances, the objective is to determine

whether the account balance.

a. Is correct.

b. Contains material errors.

c. Is fairly stated.

d. Is material in comparison to operating income.

76. A method in sampling in which all the terms in the population are divided into two

or more sub-population is

a. variables sampling.

b. attributes sampling

c. stratified sampling.

d. divisible sampling.

77. When selecting a stratified sample, the sample size is

a. determined fort .e un-stratified population and then apportioned to each

stratum.

b. determined for each stratum and selected from that stratum.

c. determined for each stratum and selected randomly from the entire un-stratified

population.

d. always larger than if un-stratified sampling had been used.

78. An inherent part of the sampling that results from testing less than the entire

population is

a. the acceptable risks of over-reliance.

b. sampling risks.

c. the upper bound.

d. inherent risks.



79. The estimated total population error is calculated as

a. the point estimate plus the sampling error.

b. the point estimate minus the sampling error.

c. the sampling error minus the point estimate.

d. none of the above.

80. The final step in the evaluation of the audit results is the decision to

a . accept the population as fairly stated or to require further action.

b. determine sampling error and calculate the estimated total population error.

c. project the point estimate.

d. determine the error in each sample.

81. A relatively recent innovation in sampling methodology that was developed

specifically for use by auditors is

a. attributes sampling.

b. variables sampling.

c. peso-unit sampling.

d. discovery sampling.

82. The most commonly used method of statistical sampling for tests of details of

balances is

a. attributes sampling.

b. variables sampling.

c. peso-unit sampling.


83. The risk the auditor is willing to take of accepting a balance as correct when the true

error in the balance is equal to or greater than the tolerable misstatement is

a. the upper bound.

b. the tolerable risk.

c. the acceptable risk of incorrect acceptance.

d. the lower bound.



84. The primary factor from the audit risk model which affects the auditor's decision

about acceptable risk of incorrect acceptance is

a. Control risk.

b. Audit risk.

c. Detection risk.d. Inherent risk.

85. In the application of statistical technique to the estimation of peso amounts, a

preliminary sample is usually taken primarily for the purpose of estimating

population.

a. Variability

b. Mode

c. Range

d. Median

86. The method used to measure the estimated total error amount in a population

when there is both a recorded value and an audited value for each item in the

sample is

a. difference estimation.

b. mean-per-unit estimation.

c. ratio estimation.

d. peso-unit sampling.

87. The variables sampling method which generally results in smaller sample sizes than

any other method is


b. mean-per-unit estimation



88. If the size of the errors in population is proportionate to the recorded value of the

population items, smaller sample sizes will be generated using







89. The auditor is concerned with the audited value rather than the error amount of

each item in the sample when using



c. ratio estimation.d. peso-unit sampling.

90. The average audited value of items in the sample multiplied times the population

size is

a. computed precision interval.

b. point estimate.

c. recorded book value.

d. upper confidence limit.

91. Stratification is applicable to difference, mean-per-unit, and ratio estimation, but it

is most commonly used with





92. While performing a substantive test of details during an audit, the auditor

determined that the sample results supported the conclusion that the recorded

account balance was materially misstated. It was, in fact, not materially

misstated. This situation illustrates the risk of

a. incorrect rejection.

b. incorrect acceptance

c. assessing control risk too low.

d. assessing control risk too high

93. Which of the following would be designed to estimate a numerical measurement of

a population, such as a peso value?

a. Sampling for variables.

b. Sampling for attributes.

c. Discovery sampling.

d. Numerical sampling.



94. There are many kinds of statistical estimates that an auditor may fin useful, but

basically every accounting estimate is either of a quantity or of an error rate.

The statistical terms that roughly correspond to "quantities" and "error rate",

respectively, area. attributes and variables.

b. variables and attributes

c. constants and attributes.

d. constants and variables.

95. Tolerable error is a statistical measure of the maximum likely difference between

the sample estimate and the true but unknown population total, and is directly

related to

a. reliability of evidence.

b relative risk

c. materiality.

d. cost benefit analysis.

96. An important statistic to consider when using a statistical sampling audit plan IS the

population variability. The population variability is measured by the

a. sample mean

b. standard deviation.

c. standard error of the sample men.

d. estimated population total minus the actual population.

97. Increases in the tolerable misstatement has what effect on the planned allowance

for sampling risk?

a. Increases.

b. Decreases.

c. No effect.

d. Indeterminate.

98. Which of the following is not generally used for selecting samples?

a. Random number tables.

b. Random number generators.

c. Physical representation numbers.

d. Systematic selection.



99. In performing a test of a control last year the auditors specified a tolerable deviation

rate of X percent. This year the auditors have specified a tolerable rate of less

than X percent. Assuming that all other factors remain the same, which of the

following is true regarding the relationship between this year's sample size

compared to last year’s sample size?a. This year's sample is larger than last year's sample.

b. This year's sample is smaller than last year's sample.

c. This year's sample is equal to last year's sample.

d. T his year's sample is indeterminate in relation to last year's sample.

100. The auditor using non-statistical attributes sampling, but who nevertheless has

chosen the sample in conformity with random selection procedures:

a. Need not consider the risk of assessing control risk too low.

b. Had committed a nonsampling error.

c. Will have to use discovery sampling techniques to evaluate the results.

d. Should compare the deviation rate of the sample to the tolerable rate.

101. When using sampling for tests of controls, which of the following audit

consequences may follow?

a. If sample results indicate that compliance is adequate, but in fact it is not,

control risk will be assessed too low.

b. If sample results indicate that compliance is adequate, but in fact it is not,

control risk will be assessed too high.

c. If sample results indicate that compliance is inadequate, but in fact it is

adequate, the audit is likely to be faulty because of reduced substantive tests.

d. If sample results indicate that compliance inadequate, but in fact it is adequate,

control risk will be assessed too low.

102. Which of the following is generally not true about statistical sampling as compared

to non-statistical sampling?

a. Statistical samples are more representative of the population.

b. Statistical sample plans involve additional costs of evaluation.

c. Statistical sampling allows a more objective evaluation of sample results.

d. Statistical sampling may assist the auditors in designing efficient samples.



103. Which of the following may be used to reduce the risk of nonsampling errors?

a. Increasing the size of audit samples.

b. Stratifying audit samples.

c. Adequately .planning audit samples.

d. Using statistical sampling techniques.

104. When using statistical sampling, which of the following need not be known to

evaluate the results of an attribute sample?

a. Sample size.

b. Risk of assessing control risk too low.

c. Number of deviations in the population.

d. Number of deviations found in the sample

105. Increases in the planned allowance for sampling risk have what effect on required

sample size?

a. Increases.

b. Decreases.

c. No effect.

d. Indeterminate.

106. What effect does obtaining a sample with a standard deviation larger than that

estimated during planning have on the adjusted allowance for sampling risk?

a. Increases.

b. Decreases.

c. No effect.

d. Indeterminate.

107. Which of the following is a correct statement with respect to evaluating results

when using non-statistical sampling for substantive tests?

a. When the projected misstatement exceeds the tolerable misstatement, the

auditor should conclude that the population is not misstated.

b. The closer the projected misstatement is to the tolerable misstatement, the

higher the risk of material misstatement.

c. When the projected misstatement is equal to zero, the auditors may conclude

with certainty that no misstatements exist in the account.

d. When the projected misstatement percentage exceeds the risk of incorrect

acceptance the auditors will generally conclude that the population is materially

misstated.



108. Which of the following statistical sampling techniques involves taking samples in a

series of stages?

a. Systematic sampling.

b. Sequential sampling.c. Continuous sampling.

d. Multiple location sampling.

109. Which of the following types of risk is of critical importance to auditors in

performing tests of controls?

a. The risk of assessing control risk too low.

b. The risk of assessing control risk too high.

c. The risk of incorrect acceptance.

d. The risk of incorrect rejection.

110. The auditors' failure to recognize an error in an amount or an error in an internal

control data processing procedure is described as a

a. statistical error.

b. sampling error.

c. standard error of the mean.

d. non-sampling error.

111. Which of the following is an advantage of systematic sampling over random

number sampling?

a. It provides a stronger basis for statistical conclusions.

b. It enables the auditor to use the more efficient sampling with replacement

tables.

c. There may be correlation between the location of items in the population, the

feature of sampling interest, and the sampling interval.

d. It does not require establishment of correspondence between random numbers

and items in the population.



112. An important statistic to consider when using a statistical sampling audit plan is

the population variability. The population variability is measured by the

a. sample mean.

b. standard deviation.

c. standard error of the sample mean.d. estimated population total minus the actual population total.

113. Statistical sampling generally may be applied to test internal control when the

client's internal control procedures

a. depend primarily on appropriate segregation of duties.

b. are carefully reduced to writing and are included in client accounting manuals.

c. leave an audit trail in the form of evidence of compliance.

d. enable the detection of material irregularities in the accounting records.

114. Use of the ratio estimation sampling technique to estimate peso amounts is

inappropriate when

a. the total book value is known and corresponds to the sum of all individual book

values.

b. a book value for each sample item is unknown.

c. there are some observed differences between audited values and book values.

d. the audited values are nearly proportional to the book value.

115. An advantage of using statistical sampling techniques is that such techniques

a. mathematically measure risk.

b. eliminate the need for judgmental decisions.

c. define the values of allowance for sampling risk and tolerable misstatement

required to provide audit satisfaction.

d. have been established in the courts to be superior to judgmental sampling.

116. When using a statistical sampling plan, the auditors would probably require a

smaller sample if the

a. population increases.

b. desired allowance for sampling risk decreases.

c. desired risk of incorrect acceptance increases.

d. expected deviation rate increases.



117. The objective of the tolerable rate in sampling for tests of controls of an internal

control structure is to

a. determine the probability of the auditor's conclusion based upon reliance

factors.

b. determine that financial statements taken as a whole are not materially in error.c. estimate the reliability of substantive tests.

d. estimate the range of procedural deviations in the population.

118. If all other factors specified in an attributes sampling plan remain constant,

changing the specified tolerable rate from 6% to 10%,and changing the specified risk of

assessing control risk too low from 3% to 7% would cause the required sample size to

a. increase.

b. remain the same.

c. decrease.

d. change by 4%.

119. When performing a test of a control over cash disbursements, a CPA may use a

systematic sampling technique with a start at any randomly selected item. The biggest

disadvantage of this type of sampling is that the items in the population

a. must be recorded in a systematic pattern before the sample can be drawn.

b. may occur in a systematic pattern, thus destroying the sample randomness.

c. may systematically occur more than once in the sample.

d. must be systematically replaced in the population after sampling.

120. Statistical sampling provides a technique for

a. Exactly defining materiality

b. Greatly reducing the amount of substantive testing.

c. Eliminating judgment in testing.

d. Measuring the sufficiency of evidential matter.



121. An auditor plans to examine a sample of 20 checks for counter signatures as

prescribed by the client's internal control procedures. One of the checks in the chosen

sample of 20 cannot be found. The auditor should consider the reasons for this

limitation and

a. evaluate the results as if the sample size had been 19.b. treat the missing check as a deviation for the purpose of evaluating the san1ple.

c. treat the missing check in the same manner as the majority of the other 19

checks, i.e, countersigned or not.

d. choose another check to replace the missing check in the sample.

122. There are many kinds of statistical estimates that an auditor may find useful, but

basically every accounting estimate is either of a quantity or of an error rate. The

statistical terms that roughly correspond to "quantities" and "error rate”, respectively,

are

a. attributes and variables.

b. variables and attributes.

c. constants and attributes.

d. constants and variables.

123. Which of the following sampling methods is most useful to audito when testing

controls?

a. Stratified random sampling.

b. Attributes sampling.

c. Variable sampling.

d. Unrestricted random sampling with replacement.

124. Which of the following best illustrates the concept of sampling risk?

a. A randomly chosen sample may not be representative of the population as a

whole on the characteristic of interest.

b. An auditor may select audit procedures that are not appropriate to

achieve the specific objective.

c. An auditor may fail to recognize errors in the documents examined for the

chosen sample.

d. The documents related to the chosen sample may not be

available for inspection.



125. Which of the following statistical selection techniques is least desirr1ble for use by

an auditor?

a Systematic selection.

b Stratified selection.

c Block selection.d Sequential selection.

126 Which of the following statistical sampling plans does not use a flxed sample size

for tests of controls?

a Ratio estimation.

b Sequential sampling.

c Discovery sampling.

d Variables sampling.

127. Which of the following factors does an auditor need to consider planning a

particular audit sample for a test of control?

a. Number of items in the population.

b. Total peso amount of the items to be sampled.

c. Acceptable level of risk of assessing control risk too low.

d. Tolerable misstatement.

128.. Which o1 the following statements is correct concerning statiStical sampling in

tests of controls?

a The population size has little or no effect on determining sample size except for

very small populations.

b. The expected population deviation rate has little or no effect on determining

sample size except for very small populations.

c A-::. the population size doubles,the sample size also should double.

d. For a given tolerable.rate, a larger sample size should be selectd as the expected

population deviation rate decreases

auditing theory unit vi

Documents