Question 1

A common use of block testing is testing

Accepted Answer

A) cutoff. 
B) existence. 
C) authorization. 
D) valuation. 
A) cutoff. 
B) existence. 
C) authorization. 
D) valuation. A

Question 2

CAS 530 has a very specific definition of sampling.Assuming that each item (described as a sampling unit)in the populations below could be selected as part of the sample,which of the following illustrates the other part of the CAS 530 definition of sampling?

Accepted Answer

A) looking at 50 sales invoices from the current population of 100 000 
B) recalculating interest calculations for notes payable 
C) estimating the gross profit by product for all company products 
D) inspecting all legal invoices for potential contingent liabilities 
A) looking at 50 sales invoices from the current population of 100 000 
B) recalculating interest calculations for notes payable 
C) estimating the gross profit by product for all company products 
D) inspecting all legal invoices for potential contingent liabilities A

Question 3

A)Describe three types of sample selection methods commonly associated with statistical audit sampling.B)Explain the difference between sampling with replacement and without replacement.Which method is more common in audit practice?C)Describe the steps involved in systematic sampling.

Accepted Answer

A)Three types of sample selection methods commonly associated with statistical audit sampling are:
•Simple random sample selection.Every possible combination of elements in the population has an equal chance of constituting the sample.
•Systematic sample selection.A probabilistic method of sampling in which the auditor calculates an interval (the population size divided by the number of sample items desired),and selects the items for the sample based on the size of the interval and a randomly selected number between zero and the interval size.
•Probability-proportionate-to-size sample selection.The probability of selecting any individual population item is proportional to its recorded amount.
B)In replacement sampling,an element in the population can be included in the sample more than once,whereas in nonreplacement sampling,an element can be included only once.Nonreplacement sampling is more common in audit practice.
C)In systematic selection,the auditor calculates an interval (the population size divided by the number of sample items desired)called the selection,or skip,interval.The auditor then randomly selects a number between zero and the interval size less one (i.e. ,if the interval equals 20,the random number is selected from 0 to 19).This number is the starting point for the sample selection;i.e. ,the document or transaction corresponding to the random number plus the first number in the population constitutes the first item in the sample.The second sample item is the interval added to the first number (first document number in the population plus the random number);the third item is determined by adding the interval to the second number,the fourth item is determined by adding the interval to the third number,and so on.

Question 4

As part of the audit of sales,the auditor has used attribute sampling to select a sample of sales invoices.The auditor has examined the duplicate sales invoice to determine whether it was approved for credit.Which of the following would be termed the "exception?" The

Accepted Answer

A) sales invoice number. 
B) approval initials. 
C) name of the person who approves credit. 
D) absence of an authorization. 
A) sales invoice number. 
B) approval initials. 
C) name of the person who approves credit. 
D) absence of an authorization.

Question 5

The tolerable exception rate (TER)has a significant effect on sample size.The relationship of TER to sample size is

Accepted Answer

A) direct (larger TER = larger sample). 
B) inverse (larger TER = smaller sample). 
C) variable (sometimes larger,sometimes smaller). 
D) not determinable. 
A) direct (larger TER = larger sample). 
B) inverse (larger TER = smaller sample). 
C) variable (sometimes larger,sometimes smaller). 
D) not determinable.

Question 6

Which of the following statements is a valid criticism of the use of nonstatistical sampling methods?

Accepted Answer

A) Many audit tests,such as footing of journals,must be performed outside a statistical sampling context. 
B) The cost of performing random selection or testing often exceeds the benefits. 
C) Nonstatistical sampling does not differ substantially from statistical sampling methods. 
D) It can be difficult to remain unbiased in the selection of items. 
A) Many audit tests,such as footing of journals,must be performed outside a statistical sampling context. 
B) The cost of performing random selection or testing often exceeds the benefits. 
C) Nonstatistical sampling does not differ substantially from statistical sampling methods. 
D) It can be difficult to remain unbiased in the selection of items.

Question 7

As part of the audit of sales,the auditor has used attribute sampling to select a sample of sales invoices.The auditor has examined the duplicate sales invoice to determine whether it was approved for credit.The client has a December year end.In October,the auditor conducted the interim audit and drew a sample of 40 items that covered the period from January to September.In order to be able to generalize to the sales population,the auditor should also

Accepted Answer

A) select sample items from the rest of the year. 
B) increase the sample size in proportion to the total population size. 
C) use statistical methods to calculate sampling risk. 
D) use statistical methods to calculate nonsampling risk. 
A) select sample items from the rest of the year. 
B) increase the sample size in proportion to the total population size. 
C) use statistical methods to calculate sampling risk. 
D) use statistical methods to calculate nonsampling risk.

Question 8

When does the auditor use simple random sampling?

Accepted Answer

A) when the auditor has particular judgmental criteria that are used to select the sample 
B) where the auditor wants numbers in sequence and would like to select the sample rapidly 
C) for testing of cutoff after the year end with respect to accounts payable 
D) for populations where each item is considered to have the same characteristics for audit purposes 
A) when the auditor has particular judgmental criteria that are used to select the sample 
B) where the auditor wants numbers in sequence and would like to select the sample rapidly 
C) for testing of cutoff after the year end with respect to accounts payable 
D) for populations where each item is considered to have the same characteristics for audit purposes

Question 9

In statistical terms,acceptable risk of assessing control risk too low (ARIA)corresponds with

Accepted Answer

A) sampling risk. 
B) inherent risk. 
C) control risk. 
D) nonsampling risk. 
A) sampling risk. 
B) inherent risk. 
C) control risk. 
D) nonsampling risk.

Question 10

Assume that the client's internal controls require a clerk to attach a shipping document to every duplicate sales invoice but this procedure is not followed exactly 3 percent of the time.If the auditor selects a sample of 200 duplicate sales invoices,which of the following sample results is most representative of the population?

Accepted Answer

A) three shipping documents are missing 
B) six shipping documents are missing 
C) five shipping document are missing 
D) there were no shipping documents missing 
A) three shipping documents are missing 
B) six shipping documents are missing 
C) five shipping document are missing 
D) there were no shipping documents missing

Question 11

An increase in the sample size has the effect of decreasing the sampling error if the

Accepted Answer

A) actual sample exception rate increases. 
B) actual sample exception rate does not increase. 
C) number of exceptions in the sample does not increase. 
D) number of exceptions in the sample increases. 
A) actual sample exception rate increases. 
B) actual sample exception rate does not increase. 
C) number of exceptions in the sample does not increase. 
D) number of exceptions in the sample increases.

Question 12

When errors are found,a common and standard assumption in practice is to assume

Accepted Answer

A) a 100% assumption for all errors. 
B) that the actual sample errors are representative of the population errors. 
C) that the population errors are larger than the sample errors. 
D) that the population errors are smaller than the sample errors. 
A) a 100% assumption for all errors. 
B) that the actual sample errors are representative of the population errors. 
C) that the population errors are larger than the sample errors. 
D) that the population errors are smaller than the sample errors.

Question 13

You are working on the testing of internal controls over price changes in the inventory system.You completed the controls testing to determine whether all price changes were approved by the senior accountant,by reference to master file change forms.In order to place reliance on this control,your audit supervisor has decided that the error rate in the population should be less than 1%.When you calculated your sample size,you used a confidence level of 90% and predicted an error rate of less than one percent.Based on these decisions,you examined 150 inventory price master file change forms.In your testing you uncovered two deviations.Based on these results,you calculate that the actual error rate in the population could be as high as 2.33%.
Required:A)What actions are available to you regarding your planned reliance on the master file change controls? B)What are the advantages and disadvantages of each action? C)How would you decide which action to take?

Accepted Answer

The problem here is that the actual erro

Question 14

When the auditor would like to improve the efficiency of the audit by focusing work on transactions that may be more subject to material error in a particular area of the population,the auditor will use

Accepted Answer

A) block testing. 
B) haphazard sample selection. 
C) random sample selection. 
D) stratified sample selection. 
A) block testing. 
B) haphazard sample selection. 
C) random sample selection. 
D) stratified sample selection.

Question 15

The auditor is going to select a sample that is a statistical probabilistic method of sample evaluation that results in an estimate of the proportion of items in a population containing a characteristic or attribute of interest.The auditor is using what type of sampling?

Accepted Answer

A) attribute sampling 
B) discovery sampling 
C) monetary unit sampling 
D) variable estimation sampling 
A) attribute sampling 
B) discovery sampling 
C) monetary unit sampling 
D) variable estimation sampling

Question 16

After the auditor has completed all the procedures,it is important that the auditor document the work performed and review the evidence to assess the conclusion reached.This is a highly subjective process that relies heavily on

Accepted Answer

A) the auditor's professional judgment. 
B) the generally accepted accounting principles. 
C) the generally accepted auditing standards. 
D) the Rules of Professional Conduct. 
A) the auditor's professional judgment. 
B) the generally accepted accounting principles. 
C) the generally accepted auditing standards. 
D) the Rules of Professional Conduct.

Question 17

The most common method used for performing statistical tests of controls is

Accepted Answer

A) variables sampling. 
B) attribute sampling. 
C) judgment sampling. 
D) random selection of samples. 
A) variables sampling. 
B) attribute sampling. 
C) judgment sampling. 
D) random selection of samples.

Question 18

A public accountant examining inventory may appropriately apply sampling for attributes in order to estimate the

Accepted Answer

A) average price of inventory items. 
B) percentage of slow-moving inventory items. 
C) dollar value of inventory. 
D) physical quantity of inventory items. 
A) average price of inventory items. 
B) percentage of slow-moving inventory items. 
C) dollar value of inventory. 
D) physical quantity of inventory items.

Question 19

As part of the audit of sales,the auditor has used attribute sampling to select a sample of sales invoices.The auditor has examined the duplicate sales invoice to determine whether it was approved for credit.Which of the following would be termed the "attribute?" The

Accepted Answer

A) sales invoice number. 
B) approval initials. 
C) name of the person who approves credit. 
D) absence of an authorization. 
A) sales invoice number. 
B) approval initials. 
C) name of the person who approves credit. 
D) absence of an authorization.

Question 20

When the auditor intends to evaluate a sample statistically,the only acceptable selection method is

Accepted Answer

A) probabilistic selection. 
B) judgmental selection. 
C) haphazard selection. 
D) block selection. 
A) probabilistic selection. 
B) judgmental selection. 
C) haphazard selection. 
D) block selection.

A common use of block testing is testing

CAS 530 has a very specific definition of sampling.Assuming that each item (described as a sampling unit)in the populations below could be selected as part of the sample,which of the following illustrates the other part of the CAS 530 definition of sampling?

A)Describe three types of sample selection methods commonly associated with statistical audit sampling.B)Explain the difference between sampling with replacement and without replacement.Which method is more common in audit practice?C)Describe the steps involved in systematic sampling.

As part of the audit of sales,the auditor has used attribute sampling to select a sample of sales invoices.The auditor has examined the duplicate sales invoice to determine whether it was approved for credit.Which of the following would be termed the "exception?" The

The tolerable exception rate (TER)has a significant effect on sample size.The relationship of TER to sample size is

Which of the following statements is a valid criticism of the use of nonstatistical sampling methods?

When does the auditor use simple random sampling?

In statistical terms,acceptable risk of assessing control risk too low (ARIA)corresponds with

An increase in the sample size has the effect of decreasing the sampling error if the

When errors are found,a common and standard assumption in practice is to assume

When the auditor would like to improve the efficiency of the audit by focusing work on transactions that may be more subject to material error in a particular area of the population,the auditor will use

The auditor is going to select a sample that is a statistical probabilistic method of sample evaluation that results in an estimate of the proportion of items in a population containing a characteristic or attribute of interest.The auditor is using what type of sampling?

After the auditor has completed all the procedures,it is important that the auditor document the work performed and review the evidence to assess the conclusion reached.This is a highly subjective process that relies heavily on

The most common method used for performing statistical tests of controls is

A public accountant examining inventory may appropriately apply sampling for attributes in order to estimate the

As part of the audit of sales,the auditor has used attribute sampling to select a sample of sales invoices.The auditor has examined the duplicate sales invoice to determine whether it was approved for credit.Which of the following would be termed the "attribute?" The

When the auditor intends to evaluate a sample statistically,the only acceptable selection method is

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Professional Ethics and Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Client Acceptance,Planning,and Materiality

Assessing the Risk of Material Misstatement

Internal Control and COSO Framework

Assessing Control Risk and Designing Test of Controls

Develop Risk Response: Audit Strategy and Audit Program

Audit of the Revenue Cycle

Audit of the Acquisition and Payment Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

Filters

Exam 11: Audit Sampling Concepts

A common use of block testing is testing

CAS 530 has a very specific definition of sampling.Assuming that each item (described as a sampling unit)in the populations below could be selected as part of the sample,which of the following illustrates the other part of the CAS 530 definition of sampling?

A)Describe three types of sample selection methods commonly associated with statistical audit sampling.B)Explain the difference between sampling with replacement and without replacement.Which method is more common in audit practice?C)Describe the steps involved in systematic sampling.

As part of the audit of sales,the auditor has used attribute sampling to select a sample of sales invoices.The auditor has examined the duplicate sales invoice to determine whether it was approved for credit.Which of the following would be termed the "exception?" The

The tolerable exception rate (TER)has a significant effect on sample size.The relationship of TER to sample size is

Which of the following statements is a valid criticism of the use of nonstatistical sampling methods?

When does the auditor use simple random sampling?

In statistical terms,acceptable risk of assessing control risk too low (ARIA)corresponds with

An increase in the sample size has the effect of decreasing the sampling error if the

When errors are found,a common and standard assumption in practice is to assume

When the auditor would like to improve the efficiency of the audit by focusing work on transactions that may be more subject to material error in a particular area of the population,the auditor will use

The auditor is going to select a sample that is a statistical probabilistic method of sample evaluation that results in an estimate of the proportion of items in a population containing a characteristic or attribute of interest.The auditor is using what type of sampling?

After the auditor has completed all the procedures,it is important that the auditor document the work performed and review the evidence to assess the conclusion reached.This is a highly subjective process that relies heavily on

The most common method used for performing statistical tests of controls is

A public accountant examining inventory may appropriately apply sampling for attributes in order to estimate the

As part of the audit of sales,the auditor has used attribute sampling to select a sample of sales invoices.The auditor has examined the duplicate sales invoice to determine whether it was approved for credit.Which of the following would be termed the "attribute?" The

When the auditor intends to evaluate a sample statistically,the only acceptable selection method is

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Professional Ethics and Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Client Acceptance,Planning,and Materiality

Assessing the Risk of Material Misstatement

Internal Control and COSO Framework

Assessing Control Risk and Designing Test of Controls

Develop Risk Response: Audit Strategy and Audit Program

Audit of the Revenue Cycle

Audit of the Acquisition and Payment Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

Filters