Question 1

When selecting a sample size for substantive tests of balances which factor, other factors being equal, would result in a larger sample?

Accepted Answer

A) A decrease in the tolerable misstatement 
B) Small expected misstatements 
C) An increase in the tolerable misstatement 
D) An increase in the acceptable risk of incorrect acceptance 
A) A decrease in the tolerable misstatement 
B) Small expected misstatements 
C) An increase in the tolerable misstatement 
D) An increase in the acceptable risk of incorrect acceptance A

Question 2

Tolerable misstatement is inversely related to sample size.

Accepted Answer

A) True 
 B)False  True

Question 3

Estimated misstatement in the population and sample size are inversely related; that is, as estimated misstatement increases, sample size decreases.

Accepted Answer

A) True 
 B)False  False

Question 4

An accounts receivable population contains a total of four customers.The accounts, the amounts, and the cumulative total are shown below.Monetary unit sampling is to be used.  
Based on the information above, the population size is:

Accepted Answer

A) 4) 
B) 574. 
C) 1,272. 
D) $2,684. 
A) 4) 
B) 574. 
C) 1,272. 
D) $2,684.

Question 5

You are auditing Raji and Company.You discover an item of inventory with an audited value of $5,000 with a recorded amount of $3,000.If this is the only error you discover the projected misstatement for the sample would be:

Accepted Answer

A) $5,000. 
B) $2,000. 
C) $3,000. 
D) $4,000. 
A) $5,000. 
B) $2,000. 
C) $3,000. 
D) $4,000.

Question 6

Acceptable risk of incorrect rejection affects auditors' action only when they conclude that a population is:

Accepted Answer

A) fairly stated. 
B) acceptable. 
C) not fairly stated. 
D) acceptable after certain adjustments. 
A) fairly stated. 
B) acceptable. 
C) not fairly stated. 
D) acceptable after certain adjustments.

Question 7

An auditor uses monetary unit sampling with a sampling interval of $20,000 and detects an item with a recorded amount of $10,000 with an audited value of $4,000.The projected misstatement of the sample is:

Accepted Answer

A) $12,000. 
B) $6,000. 
C) $10,000. 
D) $3,000. 
A) $12,000. 
B) $6,000. 
C) $10,000. 
D) $3,000.

Question 8

In monetary unit sampling, a sampling interval of 900 means that:

Accepted Answer

A) every 900ᵗʰ item will be selected. 
B) every 900ᵗʰ dollar in the account will be sampled. 
C) expected misstatement is 900. 
D) tolerable misstatement is 900. 
A) every 900ᵗʰ item will be selected. 
B) every 900ᵗʰ dollar in the account will be sampled. 
C) expected misstatement is 900. 
D) tolerable misstatement is 900.

Question 9

Accounts with zero or negative year-end balances have no chance of being included in a standard probability proportional to size (PPS)sample.

Accepted Answer

A) True 
 B)False

Question 10

The allowance for sampling risk when no misstatements are found in the sample is:

Accepted Answer

A) tolerable risk of misstatement. 
B) basic precision. 
C) confidence factor. 
D) population variance. 
A) tolerable risk of misstatement. 
B) basic precision. 
C) confidence factor. 
D) population variance.

Question 11

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

Accepted Answer

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. 
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.

Question 12

When using monetary unit sampling, the recorded dollar population is a definition of all the items in the:

Accepted Answer

A) population. 
B) population which the auditor has included in the sample. 
C) population which contain errors. 
D) sample which contain errors. 
A) population. 
B) population which the auditor has included in the sample. 
C) population which contain errors. 
D) sample which contain errors.

Question 13

The statistical methods used to evaluate monetary unit samples:

Accepted Answer

A) neither exclude nor include units twice. 
B) may permit the inclusion of a unit in the sample more than once. 
C) do not permit a unit to be included in the sample more than once. 
D) ignore the possibility that a unit may be included in a sample more than once. 
A) neither exclude nor include units twice. 
B) may permit the inclusion of a unit in the sample more than once. 
C) do not permit a unit to be included in the sample more than once. 
D) ignore the possibility that a unit may be included in a sample more than once.

Question 14

If an auditor desires a greater level of assurance in auditing a balance, the acceptable risk of incorrect acceptance:

Accepted Answer

A) is reduced. 
B) is increased. 
C) is not changed. 
D) may be reduced or increased depending upon other circumstances. 
A) is reduced. 
B) is increased. 
C) is not changed. 
D) may be reduced or increased depending upon other circumstances.

Question 15

When defining the population and the sampling unit for tests of details of balances:

Accepted Answer

A) the population is defined as all of the transactions in the journal for the period. 
B) the sampling unit must be the same for all balance sheet accounts. 
C) if sampling for completeness, the sampling unit will be customers with zero balances. 
D) if sampling for completeness, the sampling unit will be the items making up the recorded population. 
A) the population is defined as all of the transactions in the journal for the period. 
B) the sampling unit must be the same for all balance sheet accounts. 
C) if sampling for completeness, the sampling unit will be customers with zero balances. 
D) if sampling for completeness, the sampling unit will be the items making up the recorded population.

Question 16

The most commonly used method of statistical sampling for tests of details of balances is:

Accepted Answer

A) attributes sampling. 
B) systematic sampling. 
C) discovery sampling. 
D) monetary unit sampling. 
A) attributes sampling. 
B) systematic sampling. 
C) discovery sampling. 
D) monetary unit sampling.

Question 17

Which of the following is not a problem with monetary unit selection?

Accepted Answer

A) Population items with a zero recorded balance 
B) Population items that should have a zero balance but do not 
C) Accounts with negative balances 
D) Accounts with small recorded balances that are significantly understated 
A) Population items with a zero recorded balance 
B) Population items that should have a zero balance but do not 
C) Accounts with negative balances 
D) Accounts with small recorded balances that are significantly understated

Question 18

The most important difference among tests of controls, substantive tests of transactions, and tests of details of balances lies in what the auditor wants to measure.Explain what each type of test attempts to measure.

Accepted Answer

Tests of controls focus on testing the e

Question 19

The word below that best explains the relationship between required sample size and the acceptable risk of incorrect acceptance is:

Accepted Answer

A) inverse. 
B) direct. 
C) proportional. 
D) indeterminate. 
A) inverse. 
B) direct. 
C) proportional. 
D) indeterminate.

Question 20

The auditors principal objective when using a sample of tests of details of balances is whether the:

Accepted Answer

A) account balance being audited is fairly stated. 
B) transactions being audited are free of misstatements. 
C) controls being tested are operating effectively. 
D) transactions and account balances being audited are fairly stated. 
A) account balance being audited is fairly stated. 
B) transactions being audited are free of misstatements. 
C) controls being tested are operating effectively. 
D) transactions and account balances being audited are fairly stated.

Exam 17: Audit Sampling for Tests of Details of Balances

When selecting a sample size for substantive tests of balances which factor, other factors being equal, would result in a larger sample?

Tolerable misstatement is inversely related to sample size.

Estimated misstatement in the population and sample size are inversely related; that is, as estimated misstatement increases, sample size decreases.

An accounts receivable population contains a total of four customers.The accounts, the amounts, and the cumulative total are shown below.Monetary unit sampling is to be used. Based on the information above, the population size is:

You are auditing Raji and Company.You discover an item of inventory with an audited value of $5,000 with a recorded amount of $3,000.If this is the only error you discover the projected misstatement for the sample would be:

Acceptable risk of incorrect rejection affects auditors' action only when they conclude that a population is:

An auditor uses monetary unit sampling with a sampling interval of $20,000 and detects an item with a recorded amount of $10,000 with an audited value of $4,000.The projected misstatement of the sample is:

In monetary unit sampling, a sampling interval of 900 means that:

Accounts with zero or negative year-end balances have no chance of being included in a standard probability proportional to size (PPS)sample.

The allowance for sampling risk when no misstatements are found in the sample is:

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

When using monetary unit sampling, the recorded dollar population is a definition of all the items in the:

The statistical methods used to evaluate monetary unit samples:

If an auditor desires a greater level of assurance in auditing a balance, the acceptable risk of incorrect acceptance:

When defining the population and the sampling unit for tests of details of balances:

The most commonly used method of statistical sampling for tests of details of balances is:

Which of the following is not a problem with monetary unit selection?

The most important difference among tests of controls, substantive tests of transactions, and tests of details of balances lies in what the auditor wants to measure.Explain what each type of test attempts to measure.

The word below that best explains the relationship between required sample size and the acceptable risk of incorrect acceptance is:

The auditors principal objective when using a sample of tests of details of balances is whether the:

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

Internal Control, Control Risk, and Section 404 Audits

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

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

Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

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