Question 1

A danger in setting the acceptable risk of overreliance too low is

Accepted Answer

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

Question 2

Which of the following statements is most correct concerning the quantification of sampling risk?

Accepted Answer

A)  Sampling risk cannot be quantified. 
B)  Sampling risk can be quantified only when nonprobabilistic selection techniques are used to select the sample. 
C)  Sampling risk can be quantified only when probabilistic selection techniques are used to select the sample. 
D)  None of the above is correct. 
A)  Sampling risk cannot be quantified. 
B)  Sampling risk can be quantified only when nonprobabilistic selection techniques are used to select the sample. 
C)  Sampling risk can be quantified only when probabilistic selection techniques are used to select the sample. 
D)  None of the above is correct.

Question 3

An auditor might conclude that the computed upper exception rate (CUER) for missing shipping documents is 4 percent at a 5 percent sampling risk, meaning the auditor concludes that the exception rate in the population is no greater than 5 percent with a 4 percent risk of the exception rate exceeding 5 percent.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements is most correct?

Accepted Answer

A)  A sample of all items of a population will eliminate sampling risk, but increase nonsampling risk. 
B)  The use of an appropriate sample selection technique ensures a representative sample. 
C)  The auditor's failure to recognize an exception is a significant cause of sampling risk. 
D)  The use of inappropriate audit procedures is a significant cause of nonsampling risk. 
A)  A sample of all items of a population will eliminate sampling risk, but increase nonsampling risk. 
B)  The use of an appropriate sample selection technique ensures a representative sample. 
C)  The auditor's failure to recognize an exception is a significant cause of sampling risk. 
D)  The use of inappropriate audit procedures is a significant cause of nonsampling risk.

Question 5

When using statistical sampling, the auditor would most likely require a smaller sample if the

Accepted Answer

A)  population increases. 
B)  desired reliability decreases. 
C)  desired precision interval narrows. 
D)  expected exception rate increases. 
A)  population increases. 
B)  desired reliability decreases. 
C)  desired precision interval narrows. 
D)  expected exception rate increases.

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

Deviation refers to a departure from prescribed controls or amounts that are not monetarily correct.

Accepted Answer

A) True 
 B)False

Question 8

As the auditor performs statistical procedures and finds material weaknesses in internal controls, it is important to communicate in writing to those at the audit client charged with governance.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements is most correct with respect to the evaluation of nonprobabilistic sample results?

Accepted Answer

A)  It is acceptable to make nonprobabilistic evaluations only when probabilistic sample selection is used. 
B)  It is acceptable to make nonprobabilistic evaluations only if the auditor cannot quantify sampling risk. 
C)  It is never acceptable to evaluate a nonprobabilistic sample using statistical methods. 
D)  All of the above are correct. 
A)  It is acceptable to make nonprobabilistic evaluations only when probabilistic sample selection is used. 
B)  It is acceptable to make nonprobabilistic evaluations only if the auditor cannot quantify sampling risk. 
C)  It is never acceptable to evaluate a nonprobabilistic sample using statistical methods. 
D)  All of the above are correct.

Question 10

When the auditor goes through a population and selects items using nonprobabilistic selection methods, without regard to their size, source, or other distinguishing characteristics, it is called

Accepted Answer

A)  block sample selection. 
B)  haphazard selection. 
C)  systematic sample selection. 
D)  statistical selection. 
A)  block sample selection. 
B)  haphazard selection. 
C)  systematic sample selection. 
D)  statistical selection.

Question 11

The auditor must use the same TER and ARO levels for all attributes of an audit test.

Accepted Answer

A) True 
 B)False

Question 12

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.

Question 13

The upper limit of the interval estimate is also known as the confidence interval.

Accepted Answer

A) True 
 B)False

Question 14

The tolerable exception rate is the rate that the auditor will permit in the population and still be willing to conclude a control is effective.

Accepted Answer

A) True 
 B)False

Question 15

As the auditor, you are assessing the proper sample size to use in testing controls. When using attributes sampling, which of the following is most correct?

Accepted Answer

A)  A 10% change in population size will have the least effect on sample size. 
B)  A 10% change in the tolerable deviation rate will have the least effect on sample size. 
C)  A 10% change in the expected deviation rate will have the least effect on sample size. 
D)  A 10% change in the tolerable deviation rate will have the most effect on sample size. 
A)  A 10% change in population size will have the least effect on sample size. 
B)  A 10% change in the tolerable deviation rate will have the least effect on sample size. 
C)  A 10% change in the expected deviation rate will have the least effect on sample size. 
D)  A 10% change in the tolerable deviation rate will have the most effect on sample size.

Question 16

The auditor uses professional judgment in establishing the tolerable exception rate for an attribute being tested in a population.

Accepted Answer

A) True 
 B)False

Question 17

There are 14 steps to attributes sampling, divided into three sections: plan the sample, select the sample and perform the audit procedures, and evaluate the results. Discuss the three steps that comprise the "evaluate the results" section.

Accepted Answer

The steps that comprise the "evaluate th

Question 18

Acceptable risk of overreliance is the risk that the auditor is willing to take in accepting a control as effective when the true population exception rate is greater than the estimated population exception rate.

Accepted Answer

A) True 
 B)False

Question 19

If the auditor decides to assess control risk at the moderate level in a private company audit, when in previous years the auditor set control risk at the maximum level, then tests of controls for the current year would be

Accepted Answer

A)  increased in number. 
B)  reduced in number. 
C)  not performed. 
D)  unchanged from prior planned settings. 
A)  increased in number. 
B)  reduced in number. 
C)  not performed. 
D)  unchanged from prior planned settings.

Question 20

In using sampling distribution for attributes, which one of the following must be known to evaluate the sample results?

Accepted Answer

A)  estimated dollar value of the population 
B)  standard exception of the values in the population 
C)  actual exception rate of the attribute in the population 
D)  sample size 
A)  estimated dollar value of the population 
B)  standard exception of the values in the population 
C)  actual exception rate of the attribute in the population 
D)  sample size

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

A danger in setting the acceptable risk of overreliance too low is

Which of the following statements is most correct concerning the quantification of sampling risk?

Which of the following statements is most correct?

When using statistical sampling, the auditor would most likely require a smaller sample if the

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

Deviation refers to a departure from prescribed controls or amounts that are not monetarily correct.

As the auditor performs statistical procedures and finds material weaknesses in internal controls, it is important to communicate in writing to those at the audit client charged with governance.

Which of the following statements is most correct with respect to the evaluation of nonprobabilistic sample results?

When the auditor goes through a population and selects items using nonprobabilistic selection methods, without regard to their size, source, or other distinguishing characteristics, it is called

The auditor must use the same TER and ARO levels for all attributes of an audit test.

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

The upper limit of the interval estimate is also known as the confidence interval.

The tolerable exception rate is the rate that the auditor will permit in the population and still be willing to conclude a control is effective.

As the auditor, you are assessing the proper sample size to use in testing controls. When using attributes sampling, which of the following is most correct?

The auditor uses professional judgment in establishing the tolerable exception rate for an attribute being tested in a population.

There are 14 steps to attributes sampling, divided into three sections: plan the sample, select the sample and perform the audit procedures, and evaluate the results. Discuss the three steps that comprise the "evaluate the results" section.

Acceptable risk of overreliance is the risk that the auditor is willing to take in accepting a control as effective when the true population exception rate is greater than the estimated population exception rate.

If the auditor decides to assess control risk at the moderate level in a private company audit, when in previous years the auditor set control risk at the maximum level, then tests of controls for the current year would be

In using sampling distribution for attributes, which one of the following must be known to evaluate the sample results?

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 Materiality

Assessing the Risk of Material Misstatement

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, 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