Question 1

Which of the following is not a disadvantage of monetary unit sampling?

Accepted Answer

A) It may be difficult to select samples from large population without computer assistance. 
B) The total misstatement bounds resulting when misstatements are found may be too low to be useful to the auditor. 
C) The total misstatement bounds resulting when misstatements are found may be too high to be useful to the auditor. 
D) Each of the above is a disadvantage. 
A) It may be difficult to select samples from large population without computer assistance. 
B) The total misstatement bounds resulting when misstatements are found may be too low to be useful to the auditor. 
C) The total misstatement bounds resulting when misstatements are found may be too high to be useful to the auditor. 
D) Each of the above is a disadvantage.

Question 2

Acceptable audit risk and acceptable risk of incorrect acceptance are inversely related; that is, as AAR increases, ARIA decreases.

Accepted Answer

A) True 
 B)False

Question 3

When using nonstatistical sampling, the larger the sample size, the greater the auditor's confidence that the point estimate is close to the true population value.

Accepted Answer

A) True 
 B)False

Question 4

What is the purpose of applying stratified sampling to a population?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 5

The risk the auditor is willing to take of accepting a balance as correct when the true misstatement in the balance under audit is greater than the tolerable misstatement is:

Accepted Answer

A) the upper bound. 
B) the tolerable risk. 
C) the acceptable risk of incorrect acceptance. 
D) the lower bound. 
A) the upper bound. 
B) the tolerable risk. 
C) the acceptable risk of incorrect acceptance. 
D) the lower bound.

Question 6

The purpose of stratified sampling is to achieve a greater confidence level (lower risk of incorrect acceptance)for a given sample size.

Accepted Answer

A) True 
 B)False

Question 7

The client's trial balance has a balance of $410,000 for merchandise inventory.As the auditor you are willing to accept a balance that is within $20,000 of either side of the recorded balance.You compute a 95% confidence interval of $395,000 to $425,000.You could therefore:

Accepted Answer

A) reject the trial balance amount. 
B) accept the trial balance amount. 
C) increase the sample size to assure more precision. 
D) use alternative audit procedures to satisfy yourself as to the correct balance. 
A) reject the trial balance amount. 
B) accept the trial balance amount. 
C) increase the sample size to assure more precision. 
D) use alternative audit procedures to satisfy yourself as to the correct balance.

Question 8

If the misstatement bound exceeds tolerable misstatement, the population is considered acceptable.

Accepted Answer

A) True 
 B)False

Question 9

Acceptable risk of incorrect rejection is the statistical risk that the auditor has concluded that a population is materially misstated when it is not.

Accepted Answer

A) True 
 B)False

Question 10

Consider the steps in sampling for tests of details and for tests of controls.Explain the differences in applying sampling to these two types of tests.

Accepted Answer

The differ

Question 11

The sample size is inversely related to the computed precision interval in difference estimation; that is, as sample size increases, the computed precision interval decreases.

Accepted Answer

A) True 
 B)False

Question 12

The larger the sample size, the more confident the auditor can be that the point estimate is close to the true population value.

Accepted Answer

A) True 
 B)False

Question 13

Factors considered by an auditor to determine the possibility that the true population misstatement exceeds a tolerable amount in a nonstatistical sample include all of the following except for:

Accepted Answer

A) the extent to which items in the population have been audited 100%. 
B) the difference between the point estimate and acceptable control risk. 
C) whether misstatements tend to be offsetting or in only one direction. 
D) the amounts of individual misstatements. 
A) the extent to which items in the population have been audited 100%. 
B) the difference between the point estimate and acceptable control risk. 
C) whether misstatements tend to be offsetting or in only one direction. 
D) the amounts of individual misstatements.

Question 14

Required sample size increases as the auditor's tolerable misstatement for an account balance or class of transactions decreases.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following needs to be considered when the auditor generalizes from the sample to the population?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 16

If the auditor believes that there will be more than just a few exceptions discovered, and desires an accurate estimate of the dollar value of the exceptions, he or she will use:

Accepted Answer

A) attributes sampling. 
B) monetary unit sampling. 
C) block sampling. 
D) variables sampling. 
A) attributes sampling. 
B) monetary unit sampling. 
C) block sampling. 
D) variables sampling.

Question 17

There are 14 steps to audit sampling for details of balances, divided into three sections: plan the sample, select the sample and perform the audit procedures, and evaluate the results.Discuss 5 of the 9 steps included in the "plan the sample" section for nonstatistical sampling.

Accepted Answer

The steps comprising the "plan the sampl

Question 18

When the sample selection is done using probability proportional to size sample selection (PPS):

Accepted Answer

A) the actual number of units selected for testing may be more than the computed sample size. 
B) the auditor must use systematic selection, rather than random selection of dollars. 
C) population items with a zero recorded balance have no chance of being selected. 
D) negative balances must be treated as positive balances. 
A) the actual number of units selected for testing may be more than the computed sample size. 
B) the auditor must use systematic selection, rather than random selection of dollars. 
C) population items with a zero recorded balance have no chance of being selected. 
D) negative balances must be treated as positive balances.

Question 19

To determine the sampling interval, the population is divided by the confidence factor.

Accepted Answer

A) True 
 B)False

Question 20

If analytical procedures are performed with no indications of likely misstatements, ARIA will ________ and the sample size will ________.

Accepted Answer

A) remain the same, increase 
B) decrease, decrease 
C) increase, decrease 
D) decrease, increase 
A) remain the same, increase 
B) decrease, decrease 
C) increase, decrease 
D) decrease, increase

Exam 17: Audit Sampling for Tests of Details of Balances

Which of the following is not a disadvantage of monetary unit sampling?

Acceptable audit risk and acceptable risk of incorrect acceptance are inversely related; that is, as AAR increases, ARIA decreases.

When using nonstatistical sampling, the larger the sample size, the greater the auditor's confidence that the point estimate is close to the true population value.

What is the purpose of applying stratified sampling to a population?

The risk the auditor is willing to take of accepting a balance as correct when the true misstatement in the balance under audit is greater than the tolerable misstatement is:

The purpose of stratified sampling is to achieve a greater confidence level (lower risk of incorrect acceptance)for a given sample size.

The client's trial balance has a balance of $410,000 for merchandise inventory.As the auditor you are willing to accept a balance that is within $20,000 of either side of the recorded balance.You compute a 95% confidence interval of $395,000 to $425,000.You could therefore:

If the misstatement bound exceeds tolerable misstatement, the population is considered acceptable.

Acceptable risk of incorrect rejection is the statistical risk that the auditor has concluded that a population is materially misstated when it is not.

Consider the steps in sampling for tests of details and for tests of controls.Explain the differences in applying sampling to these two types of tests.

The sample size is inversely related to the computed precision interval in difference estimation; that is, as sample size increases, the computed precision interval decreases.

The larger the sample size, the more confident the auditor can be that the point estimate is close to the true population value.

Factors considered by an auditor to determine the possibility that the true population misstatement exceeds a tolerable amount in a nonstatistical sample include all of the following except for:

Required sample size increases as the auditor's tolerable misstatement for an account balance or class of transactions decreases.

Which of the following needs to be considered when the auditor generalizes from the sample to the population?

If the auditor believes that there will be more than just a few exceptions discovered, and desires an accurate estimate of the dollar value of the exceptions, he or she will use:

There are 14 steps to audit sampling for details of balances, divided into three sections: plan the sample, select the sample and perform the audit procedures, and evaluate the results.Discuss 5 of the 9 steps included in the "plan the sample" section for nonstatistical sampling.

When the sample selection is done using probability proportional to size sample selection (PPS):

To determine the sampling interval, the population is divided by the confidence factor.

If analytical procedures are performed with no indications of likely misstatements, ARIA will ________ and the sample size will ________.

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

If analytical procedures are performed with no indications of likely misstatements, ARIA will and the sample size will .