Question 1

The acceptable risk of incorrect acceptance (ARIA) has a significant effect on sample size. The relationship of ARIA to sample size is

Accepted Answer

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

Question 2

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. D

Question 3

A) Describe the differences between statistical and nonstatistical sampling in terms of 1) the sample selection methods used, and 2) measurement (quantification) of sampling risk.
B) Describe each of the three types of sample selection methods commonly associated with nonstatistical audit sampling.
C) Directed sample selection is the selection of each item in the sample based on some judgment criteria established by the auditor. Describe three commonly used criteria.

Accepted Answer

A)Nonstatistical sampling differs from statistical sampling in that nonprobabilistic sampling can be used for nonstatistical sampling but not for statistical sampling.In addition, sampling risk can be quantified when using statistical sampling, but not when using nonstatistical sampling.
B)Three types of sample selection methods commonly associated with nonstatistical audit sampling are:
•Directed sample selection.Each item in the sample is selected on the basis of some judgmental criteria established by the auditor.
•Block sample selection.Several items in the population are selected in sequence.
•Haphazard sample selection.Sample items are selected from the population without regard to their size, source, or other distinguishing characteristics.
C)Commonly-used criteria used in directed sample selection are:
•Items most likely to contain misstatements; e.g., unusual or complex transactions, overdue receivables.
•Items containing selected population characteristics, such as transactions selected from each month during the year or from each location.
•Large dollar coverage in which the auditor focuses on selecting the relatively large items in the population for testing.

Question 4

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

Question 5

There are 14 steps to audit sampling, divided into four sections: plan the sample, select the sample, perform the audit procedures, and evaluate the results. Discuss each of the steps that comprise the "plan the sample" section for attribute sampling.

Accepted Answer

The steps that comprise the "plan the sa

Question 6

The sample exception rate equals the number of

Accepted Answer

A)  exceptions in the population divided by the sample size. 
B)  items in the population multiplied by the number of exceptions in the sample. 
C)  exceptions in the sample divided by the sample size. 
D)  exceptions in the population divided by the population size. 
A)  exceptions in the population divided by the sample size. 
B)  items in the population multiplied by the number of exceptions in the sample. 
C)  exceptions in the sample divided by the sample size. 
D)  exceptions in the population divided by the population size.

Question 7

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 8

One of the ways to eliminate nonsampling risk is through

Accepted Answer

A)  proper supervision and instruction of the client's employees. 
B)  proper supervision and instruction of the audit team. 
C)  the use of attribute sampling rather than variables sampling. 
D)  controls that ensure the sample drawn is random and representative. 
A)  proper supervision and instruction of the client's employees. 
B)  proper supervision and instruction of the audit team. 
C)  the use of attribute sampling rather than variables sampling. 
D)  controls that ensure the sample drawn is random and representative.

Question 9

During the audit of the fixed asset section, the auditor decided to inspect source documents supporting all fixed asset additions exceeding $3000. This type of audit procedure is called a

Accepted Answer

A)  census of the strata over $3000. 
B)  analytical review. 
C)  attribute sample. 
D)  monetary unit sample. 
A)  census of the strata over $3000. 
B)  analytical review. 
C)  attribute sample. 
D)  monetary unit sample.

Question 10

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 11

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.

Question 12

If an auditor would like to estimate how many sales invoices have errors (such as no required order number showing or authorization for customers exceeding their credit limit), the auditor would likely use

Accepted Answer

A)  random sampling with replacement. 
B)  sampling for attributes. 
C)  sampling for variables. 
D)  stratified random sampling. 
A)  random sampling with replacement. 
B)  sampling for attributes. 
C)  sampling for variables. 
D)  stratified random sampling.

Question 13

The occurrence rate or exception rate for attribute sampling is defined as the

Accepted Answer

A)  exception rate that the auditor will permit in the population and still be willing to use the assessed control risk. 
B)  risk that the auditor is willing to take of accepting a balance as correct when the true misstatement in the balance is greater than materiality. 
C)  exception rate that the auditor expects to find in the population before testing begins. 
D)  ratio of the items containing a specific attribute to the total number of population items. 
A)  exception rate that the auditor will permit in the population and still be willing to use the assessed control risk. 
B)  risk that the auditor is willing to take of accepting a balance as correct when the true misstatement in the balance is greater than materiality. 
C)  exception rate that the auditor expects to find in the population before testing begins. 
D)  ratio of the items containing a specific attribute to the total number of population items.

Question 14

You have recently been hired as an audit trainee with an internal audit department. Your first assignment will be to select the sample for a test of new capital assets acquired over the last two years. Your review of the internal audit files indicates that the last time this work was done the sample to be tested was selected on a judgmental nonstatistical basis. Based on your university/college auditing course, you believe the work offers good potential for the use of statistical sampling techniques. You know that you will have to be able to explain and justify your opinion to the internal audit manager.
Required:
Both statistical sampling and nonstatistical or judgmental sampling have advantages and disadvantages. Briefly state two advantages and two disadvantages of statistical sampling and one advantage and one disadvantage of nonstatistical sampling.

Accepted Answer

Advantages of statistical sampling:
•res

Question 15

Which of the following statements is a valid criticism of the use of non-statistical 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 16

The exception rate the auditor will permit in the population and still be willing to use the assessed level of control risk is called the

Accepted Answer

A)  tolerable exception rate. 
B)  estimated population exception rate. 
C)  acceptable risk of overreliance. 
D)  sample exception rate. 
A)  tolerable exception rate. 
B)  estimated population exception rate. 
C)  acceptable risk of overreliance. 
D)  sample exception rate.

Question 17

The process that requires the calculation of an interval and then selects the items based on the size of the interval is

Accepted Answer

A)  statistical sampling. 
B)  random selection. 
C)  systematic selection. 
D)  computerized selection. 
A)  statistical sampling. 
B)  random selection. 
C)  systematic selection. 
D)  computerized selection.

Question 18

To ensure that all the population items will be properly subjected to the sample selection process, the auditor should

Accepted Answer

A)  use a random number generator for sample selection. 
B)  use monetary unit sample selection methods. 
C)  document the range of document numbers in use by the client. 
D)  test the population for completeness. 
A)  use a random number generator for sample selection. 
B)  use monetary unit sample selection methods. 
C)  document the range of document numbers in use by the client. 
D)  test the population for completeness.

Question 19

A) Discuss what is meant by "sampling risk."
B) Discuss what is meant by "nonsampling risk."
C) Discuss two causes of nonsampling risk. Also discuss ways the auditor can control nonsampling risk.
D) Discuss two ways the auditor can control sampling risk.

Accepted Answer

A)Sampling risk occurs when the sample i

Question 20

The auditor has selected a sequence of 200 payroll cheques to verify the numerical continuity of the cheque numbers. What type of sampling is the auditor doing?

Accepted Answer

A)  haphazard 
B)  systematic 
C)  directed 
D)  block 
A)  haphazard 
B)  systematic 
C)  directed 
D)  block

The acceptable risk of incorrect acceptance (ARIA) has a significant effect on sample size. The relationship of ARIA to sample size is

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

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?

There are 14 steps to audit sampling, divided into four sections: plan the sample, select the sample, perform the audit procedures, and evaluate the results. Discuss each of the steps that comprise the "plan the sample" section for attribute sampling.

The sample exception rate equals the number of

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

One of the ways to eliminate nonsampling risk is through

During the audit of the fixed asset section, the auditor decided to inspect source documents supporting all fixed asset additions exceeding $3000. This type of audit procedure is called a

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

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

If an auditor would like to estimate how many sales invoices have errors (such as no required order number showing or authorization for customers exceeding their credit limit), the auditor would likely use

The occurrence rate or exception rate for attribute sampling is defined as the

Which of the following statements is a valid criticism of the use of non-statistical sampling methods?

The exception rate the auditor will permit in the population and still be willing to use the assessed level of control risk is called the

The process that requires the calculation of an interval and then selects the items based on the size of the interval is

To ensure that all the population items will be properly subjected to the sample selection process, the auditor should

A) Discuss what is meant by "sampling risk." B) Discuss what is meant by "nonsampling risk." C) Discuss two causes of nonsampling risk. Also discuss ways the auditor can control nonsampling risk. D) Discuss two ways the auditor can control sampling risk.

The auditor has selected a sequence of 200 payroll cheques to verify the numerical continuity of the cheque numbers. What type of sampling is the auditor doing?

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Legal Liability

Professional Judgment and Ethics

Audit Responsibilities and Objectives

Client Acceptance and Planning the Audit

Materiality and Risk

Internal Controls and Control Risk

Audit Evidence

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

The acceptable risk of incorrect acceptance (ARIA) has a significant effect on sample size. The relationship of ARIA to sample size is

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

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?

There are 14 steps to audit sampling, divided into four sections: plan the sample, select the sample, perform the audit procedures, and evaluate the results. Discuss each of the steps that comprise the "plan the sample" section for attribute sampling.

The sample exception rate equals the number of

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

One of the ways to eliminate nonsampling risk is through

During the audit of the fixed asset section, the auditor decided to inspect source documents supporting all fixed asset additions exceeding $3000. This type of audit procedure is called a

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

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

If an auditor would like to estimate how many sales invoices have errors (such as no required order number showing or authorization for customers exceeding their credit limit), the auditor would likely use

The occurrence rate or exception rate for attribute sampling is defined as the

Which of the following statements is a valid criticism of the use of non-statistical sampling methods?

The exception rate the auditor will permit in the population and still be willing to use the assessed level of control risk is called the

The process that requires the calculation of an interval and then selects the items based on the size of the interval is

To ensure that all the population items will be properly subjected to the sample selection process, the auditor should

A) Discuss what is meant by "sampling risk." B) Discuss what is meant by "nonsampling risk." C) Discuss two causes of nonsampling risk. Also discuss ways the auditor can control nonsampling risk. D) Discuss two ways the auditor can control sampling risk.

The auditor has selected a sequence of 200 payroll cheques to verify the numerical continuity of the cheque numbers. What type of sampling is the auditor doing?

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Legal Liability

Professional Judgment and Ethics

Audit Responsibilities and Objectives

Client Acceptance and Planning the Audit

Materiality and Risk

Internal Controls and Control Risk

Audit Evidence

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