Question 1

Which of the following represents the best description of the tolerable exception rate?

Accepted Answer

A) the highest exception rate the auditor will permit in the control being tested and still conclude it is operating effectively 
B) the highest exception rate the auditor expects to find in the population 
C) the number of exceptions found in the sample divided by the sample size 
D) the highest estimated exception rate in a population at a given estimated population exception rate. 
A) the highest exception rate the auditor will permit in the control being tested and still conclude it is operating effectively 
B) the highest exception rate the auditor expects to find in the population 
C) the number of exceptions found in the sample divided by the sample size 
D) the highest estimated exception rate in a population at a given estimated population exception rate. A

Question 2

Statistical sampling eliminates any professional judgment for the auditor.

Accepted Answer

A) True 
 B)False  False

Question 3

A principal advantage of statistical methods of attributes sampling over nonstatistical methods is that they provide a quantifiable basis for establishing the

Accepted Answer

A) risk of assessing control risk too low. 
B) tolerable exception rate. 
C) expected population exception rate. 
D) sample size. 
A) risk of assessing control risk too low. 
B) tolerable exception rate. 
C) expected population exception rate. 
D) sample size. D

Question 4

Sampling risk results from the auditor's failure to recognize exceptions in transaction data.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is a correct statement regarding block sampling?

Accepted Answer

A) It is acceptable to use block sampling only if a reasonable number of blocks are used. 
B) Block sampling uses sampling with replacement. 
C) Block sampling is a probabilistic sampling method. 
D) There is considerable cost and time involved when block sampling is used. 
A) It is acceptable to use block sampling only if a reasonable number of blocks are used. 
B) Block sampling uses sampling with replacement. 
C) Block sampling is a probabilistic sampling method. 
D) There is considerable cost and time involved when block sampling is used.

Question 6

Acceptable risk of overreliance is normally lower for a public company audit than a private company audit.

Accepted Answer

A) True 
 B)False

Question 7

It is virtually impossible to reduce sampling risk to zero.

Accepted Answer

A) True 
 B)False

Question 8

One of the causes of nonsampling risk is

Accepted Answer

A) choosing the wrong sample size. 
B) ineffective audit procedures. 
C) inadequate sample size. 
D) exceptions being found in the sample. 
A) choosing the wrong sample size. 
B) ineffective audit procedures. 
C) inadequate sample size. 
D) exceptions being found in the sample.

Question 9

When planning the audit sample,the ________ is (are)those items about which the auditor wishes to generalize.

Accepted Answer

A) attributes 
B) sampling unit 
C) population 
D) sample 
A) attributes 
B) sampling unit 
C) population 
D) sample

Question 10

List the three phases in audit sampling for both statistical and nonstatistical sampling.

Accepted Answer

•Plan the sample.
•S

Question 11

The sampling unit is the physical unit that corresponds to the random numbers the auditor generates.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following occurrences would be least likely to warrant further audit attention for the auditor?

Accepted Answer

A) deviations from client's established control procedures 
B) deviations from client's budgeted values 
C) monetary misstatements in populations of transaction data 
D) monetary misstatements in populations of account balance details 
A) deviations from client's established control procedures 
B) deviations from client's budgeted values 
C) monetary misstatements in populations of transaction data 
D) monetary misstatements in populations of account balance details

Question 13

When the computed upper exception rate (CUER)is greater than the tolerable exception rate (TER),it is necessary for the auditor to take specific action.Which of the following courses of action would be most difficult to justify?

Accepted Answer

A) Reduce the tolerable exception rate so as to accept the sample results. 
B) Expand the sample size and perform more tests. 
C) Revise the assessed control risk upward. 
D) Write a letter to management which outlines the control deficiencies. 
A) Reduce the tolerable exception rate so as to accept the sample results. 
B) Expand the sample size and perform more tests. 
C) Revise the assessed control risk upward. 
D) Write a letter to management which outlines the control deficiencies.

Question 14

In nonstatistical sampling,the calculated sampling error is the difference between the tolerable exception rate and the sample exception rate.

Accepted Answer

A) True 
 B)False

Question 15

In performing a review of a client's cash disbursements,an auditor uses systematic sample selection with a random start.The primary disadvantage of this technique is population items

Accepted Answer

A) may occur twice in the sample. 
B) must be reordered in a systematic pattern before the sample can be drawn. 
C) may occur in a systematic pattern,thus negating the randomness of the sample. 
D) must be replaced in the population after sampling to permit valid statistical inference. 
A) may occur twice in the sample. 
B) must be reordered in a systematic pattern before the sample can be drawn. 
C) may occur in a systematic pattern,thus negating the randomness of the sample. 
D) must be replaced in the population after sampling to permit valid statistical inference.

Question 16

Which of the following is the risk that an auditor will reach an incorrect conclusion because a sample is not representative of the population?

Accepted Answer

A) sampling risk 
B) nonsampling risk 
C) audit risk 
D) detection risk 
A) sampling risk 
B) nonsampling risk 
C) audit risk 
D) detection risk

Question 17

If a particular internal control is not followed by the client exactly 6% of the time,and the auditor's tests of that control find three control violations in a sample of 50,the sample is considered to be representative.

Accepted Answer

A) True 
 B)False

Question 18

The sum of the tolerable exception rate and the estimated population exception rate is the precision of the initial sample estimate.

Accepted Answer

A) True 
 B)False

Question 19

The relationship of tolerable exception rate (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 20

Nonprobabilistic sampling methods are not based on mathematical probabilities,and therefore the representativeness of the sample may be difficult to determine.

Accepted Answer

A) True 
 B)False

Exam 15: Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Which of the following represents the best description of the tolerable exception rate?

Statistical sampling eliminates any professional judgment for the auditor.

A principal advantage of statistical methods of attributes sampling over nonstatistical methods is that they provide a quantifiable basis for establishing the

Sampling risk results from the auditor's failure to recognize exceptions in transaction data.

Which of the following is a correct statement regarding block sampling?

Acceptable risk of overreliance is normally lower for a public company audit than a private company audit.

It is virtually impossible to reduce sampling risk to zero.

One of the causes of nonsampling risk is

When planning the audit sample,the ________ is (are)those items about which the auditor wishes to generalize.

List the three phases in audit sampling for both statistical and nonstatistical sampling.

The sampling unit is the physical unit that corresponds to the random numbers the auditor generates.

Which of the following occurrences would be least likely to warrant further audit attention for the auditor?

When the computed upper exception rate (CUER)is greater than the tolerable exception rate (TER),it is necessary for the auditor to take specific action.Which of the following courses of action would be most difficult to justify?

In nonstatistical sampling,the calculated sampling error is the difference between the tolerable exception rate and the sample exception rate.

In performing a review of a client's cash disbursements,an auditor uses systematic sample selection with a random start.The primary disadvantage of this technique is population items

Which of the following is the risk that an auditor will reach an incorrect conclusion because a sample is not representative of the population?

If a particular internal control is not followed by the client exactly 6% of the time,and the auditor's tests of that control find three control violations in a sample of 50,the sample is considered to be representative.

The sum of the tolerable exception rate and the estimated population exception rate is the precision of the initial sample estimate.

The relationship of tolerable exception rate (TER)to sample size is

Nonprobabilistic sampling methods are not based on mathematical probabilities,and therefore the representativeness of the sample may be difficult to determine.

The Demand for Audit and Other Assurance Services

The Cpa Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Fraud Auditing

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls,

Completing the Tests in the Acquisition and Payment Cycle:

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

Filters