Question 1

In the audit risk model, audit sampling applies to:

Accepted Answer

A)  detection risk. 
B)  inherent risk and control risk. 
C)  control risk and detection risk. 
D)  inherent risk and detection risk. 
E)  control risk. 
A)  detection risk. 
B)  inherent risk and control risk. 
C)  control risk and detection risk. 
D)  inherent risk and detection risk. 
E)  control risk.

Question 2

Classical variables sampling is more complex that PPS sampling.

Accepted Answer

A) True 
 B)False

Question 3

The size of a PPS sample is dependent on the variance of the population.

Accepted Answer

A) True 
 B)False

Question 4

Probability-proportional-to-size (PPS) sampling should not be used when:

Accepted Answer

A)  few or no misstatements are expected. 
B)  any misstatements are expected to be overstatements. 
C)  testing investment securities. 
D)  performing inventory price tests when few differences are anticipated. 
E)  there are some zero-balance items in the population. 
A)  few or no misstatements are expected. 
B)  any misstatements are expected to be overstatements. 
C)  testing investment securities. 
D)  performing inventory price tests when few differences are anticipated. 
E)  there are some zero-balance items in the population.

Question 5

In PPS sampling plans, tolerable misstatement:

Accepted Answer

A)  is stated as a percentage. 
B)  has an inverse effect on sample size. 
C)  is equal to materiality at the financial statement level. 
D)  is normally set at zero. 
E)  is the minimum misstatement that can exist in an account before it is considered to be materially misstated. 
A)  is stated as a percentage. 
B)  has an inverse effect on sample size. 
C)  is equal to materiality at the financial statement level. 
D)  is normally set at zero. 
E)  is the minimum misstatement that can exist in an account before it is considered to be materially misstated.

Question 6

Probability-proportional-to-size (PPS) sampling would most likely not be cost-effective in:

Accepted Answer

A)  estimating the amount of dollar error caused by deviations from a particular control. 
B)  confirming accounts receivable when unapplied credits to customer accounts are insignificant. 
C)  independently estimating the value of a certain class of transactions. 
D)  testing investment securities for overstatements. 
E)  testing additions to plant assets for overstatements. 
A)  estimating the amount of dollar error caused by deviations from a particular control. 
B)  confirming accounts receivable when unapplied credits to customer accounts are insignificant. 
C)  independently estimating the value of a certain class of transactions. 
D)  testing investment securities for overstatements. 
E)  testing additions to plant assets for overstatements.

Question 7

Tolerable deviation rate is the maximum rate of deviation from a control that an auditor is willing to accept and still use the planned control risk.

Accepted Answer

A) True 
 B)False

Question 8

The efficiency gained from stratification of a population is based on the fact that:

Accepted Answer

A)  the subpopulations can be examined by different audit personnel. 
B)  it is inherently easier to test several sets of fewer items. 
C)  the groupings are more homogeneous. 
D)  more errors are normally found in the largest and the smallest items of a population. 
E)  a change in the variability of a population affects sample size by the square root of the relative change. 
A)  the subpopulations can be examined by different audit personnel. 
B)  it is inherently easier to test several sets of fewer items. 
C)  the groupings are more homogeneous. 
D)  more errors are normally found in the largest and the smallest items of a population. 
E)  a change in the variability of a population affects sample size by the square root of the relative change.

Question 9

Which of the following approaches would not be acceptable in estimating the population standard deviation?

Accepted Answer

A)  use the exact amount found in last year's audit. 
B)  use available book values. 
C)  adjust the amount found last year based on changed conditions. 
D)  use the rate found in a preliminary sample of approximately five to ten items. 
E)  use the rate found in a preliminary sample of approximately thirty to fifty items. 
A)  use the exact amount found in last year's audit. 
B)  use available book values. 
C)  adjust the amount found last year based on changed conditions. 
D)  use the rate found in a preliminary sample of approximately five to ten items. 
E)  use the rate found in a preliminary sample of approximately thirty to fifty items.

Question 10

Careful consideration of sample design must be made to achieve efficient and effective statistical samples. This is accomplished through explicit specification of key factors and relating them through mathematical models. Consideration of the same factors in nonstatistical samples may help to produce more efficient and effective samples, even if the factors are not explicitly quantified.
REQUIRED: For each of the factors listed below, indicate its effect on sample size by inserting a D (for direct) or an I (for inverse) in the appropriate column(s).
 $$\begin{array} { l l l l } 
 \text { Factor } &\text { Effect on } \
&\text { Sample Size }\\hline
\text {1. Population size }\
\text { 2. }  \text { Variation in the population } & & \
\text { 3. }  \text { Tolerable misstatement } & \
\text { 4. Expected misstatement } & \
\text { 5. Risk of incorrect acceptance } & \
\text { 6. Risk of incorrect rejection } &
\end{array}$$

Accepted Answer

The answer of Careful consideration of sample design must be...

Question 11

Judgment is not required when the auditor uses statistical sampling.

Accepted Answer

A) True 
 B)False

Question 12

The main disadvantage of nonstatistical over statistical sampling in substantive testing is the inability, when using nonstatistical sampling, to:

Accepted Answer

A)  calculate allowance for sampling risk for a measurable level of risk. 
B)  justify the acceptance or rejection of the population. 
C)  use random selection in drawing the sample. 
D)  explicitly state the upper misstatement level. 
E)  perceive the difference between projected and tolerable misstatement as an allowance for sampling risk. 
A)  calculate allowance for sampling risk for a measurable level of risk. 
B)  justify the acceptance or rejection of the population. 
C)  use random selection in drawing the sample. 
D)  explicitly state the upper misstatement level. 
E)  perceive the difference between projected and tolerable misstatement as an allowance for sampling risk.

In the audit risk model, audit sampling applies to:

Classical variables sampling is more complex that PPS sampling.

The size of a PPS sample is dependent on the variance of the population.

Probability-proportional-to-size (PPS) sampling should not be used when:

In PPS sampling plans, tolerable misstatement:

Probability-proportional-to-size (PPS) sampling would most likely not be cost-effective in:

Tolerable deviation rate is the maximum rate of deviation from a control that an auditor is willing to accept and still use the planned control risk.

The efficiency gained from stratification of a population is based on the fact that:

Which of the following approaches would not be acceptable in estimating the population standard deviation?

Judgment is not required when the auditor uses statistical sampling.

The main disadvantage of nonstatistical over statistical sampling in substantive testing is the inability, when using nonstatistical sampling, to:

Auditing and the Public Accounting

Financial Statement Audits and

Professional Ethics

Auditors Legal Liability

Overview of the Audit Process

Audit Evidence, Audit Objectives,

Accepting the Engagement and

Materiality Decisions and Performing Analytical Procedures

Audit Risk, Including the Risk of Fraud

Understanding Internal Controls

Audit Procedures in Response to Assessed Risks: Tests of Controls

Audit Procedures in Response to Assessed Risks: Substantive Tests

Auditing the Revenue Cycle

Auditing the Expenditure Cycle

Auditing the Production and

Auditing the Investing and

Auditing Investments and

Completing the Audit and Postaudit

Attest and Assurance Services, and Related Reports

Internal, Operational, and

Filters

Exam 13: Audit Sampling in Substantive Tests

In the audit risk model, audit sampling applies to:

Classical variables sampling is more complex that PPS sampling.

The size of a PPS sample is dependent on the variance of the population.

Probability-proportional-to-size (PPS) sampling should not be used when:

In PPS sampling plans, tolerable misstatement:

Probability-proportional-to-size (PPS) sampling would most likely not be cost-effective in:

Tolerable deviation rate is the maximum rate of deviation from a control that an auditor is willing to accept and still use the planned control risk.

The efficiency gained from stratification of a population is based on the fact that:

Which of the following approaches would not be acceptable in estimating the population standard deviation?

Judgment is not required when the auditor uses statistical sampling.

The main disadvantage of nonstatistical over statistical sampling in substantive testing is the inability, when using nonstatistical sampling, to:

Auditing and the Public Accounting

Financial Statement Audits and

Professional Ethics

Auditors Legal Liability

Overview of the Audit Process

Audit Evidence, Audit Objectives,

Accepting the Engagement and

Materiality Decisions and Performing Analytical Procedures

Audit Risk, Including the Risk of Fraud

Understanding Internal Controls

Audit Procedures in Response to Assessed Risks: Tests of Controls

Audit Procedures in Response to Assessed Risks: Substantive Tests

Auditing the Revenue Cycle

Auditing the Expenditure Cycle

Auditing the Production and

Auditing the Investing and

Auditing Investments and

Completing the Audit and Postaudit

Attest and Assurance Services, and Related Reports

Internal, Operational, and

Filters