Exam 17: Audit Sampling for Tests of Details of Balances

There are 14 steps to audit sampling for tests of 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.

(Essay)

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Question 41

If the misstatement in a population is larger than tolerable misstatement without considering sampling error, the population will be considered unacceptable.

(True/False)

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Question 42

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

(Multiple Choice)

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Question 43

When using audit sampling for tests of details of balances, the acceptable risk of overreliance must be determined.

(True/False)

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Question 44

Tolerable misstatement is used to

(Multiple Choice)

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Question 45

How might auditors include negative balances when using monetary unit sampling to evaluate a population?

(Essay)

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Question 46

Auditors may find that the use of data analysis techniques allows them to test the entire population of an account balance for certain audit objectives.

(True/False)

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Question 47

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

(Multiple Choice)

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Question 48

Acceptable risk of incorrect acceptance is directly affected by acceptable audit risk.

(True/False)

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Question 49

Which of the following item(s) are needed to determine the sample size using MUS?

(Multiple Choice)

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Question 50

In the test of details of balances, the auditor wants to make inferences about the entire population based on a sample.

(True/False)

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Question 51

Monetary unit sampling is not particularly effective at detecting

(Multiple Choice)

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Question 52

Which of the following is not a type of statistical method that provides results in dollar terms?

(Multiple Choice)

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Question 53

When auditors apply MUS to a sample, the sample is selected using random sampling techniques.

(True/False)

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Question 54

A higher confidence factor increases the sample size, which increases the "confidence" that the sample is representative of the population.

(True/False)

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Question 55

While performing a substantive test of details during an audit, the auditor determined that the sample results supported the conclusion that the recorded account balance was materially misstated. Which of the following is the least likely auditor reaction to this discovery?

(Multiple Choice)

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Question 56

Tolerable misstatement is inversely related to sample size.

(True/False)

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Question 57

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

(True/False)

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Question 58

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

(Multiple Choice)

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Question 59

Match six of the terms (a-l) with the definitions provided below (1-6).

the risk that the auditor is willing to take of accepting a balance as correct when the true misstatement in the balance exceeds the tolerable misstatement

point estimate

a method of variables sampling in which the auditor estimates the population misstatement by multiplying the average misstatement in the sample by the total number of population items and also calculates sampling risk

difference estimation

the risk that the auditor is willing to take of rejecting a balance as incorrect when it is not misstated by a material amount

misstatement bounds

Correct Answer:

Verified

the risk that the auditor is willing to take of accepting a balance as correct when the true misstatement in the balance exceeds the tolerable misstatement

a method of variables sampling in which the auditor estimates the population misstatement by multiplying the average misstatement in the sample by the total number of population items and also calculates sampling risk

the risk that the auditor is willing to take of rejecting a balance as incorrect when it is not misstated by a material amount

conclusions drawn from sample results based on knowledge of sampling distributions

a statistical sampling method that provides misstatement bounds expressed in monetary amounts

sampling techniques for tests of details of balances that use the statistical inference processes

(Matching)

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Question 60

Exam 17: Audit Sampling for Tests of Details of Balances

There are 14 steps to audit sampling for tests of 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.

If the misstatement in a population is larger than tolerable misstatement without considering sampling error, the population will be considered unacceptable.

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

When using audit sampling for tests of details of balances, the acceptable risk of overreliance must be determined.

Tolerable misstatement is used to

How might auditors include negative balances when using monetary unit sampling to evaluate a population?

Auditors may find that the use of data analysis techniques allows them to test the entire population of an account balance for certain audit objectives.

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

Acceptable risk of incorrect acceptance is directly affected by acceptable audit risk.

Which of the following item(s) are needed to determine the sample size using MUS?

In the test of details of balances, the auditor wants to make inferences about the entire population based on a sample.

Monetary unit sampling is not particularly effective at detecting

Which of the following is not a type of statistical method that provides results in dollar terms?

When auditors apply MUS to a sample, the sample is selected using random sampling techniques.

A higher confidence factor increases the sample size, which increases the "confidence" that the sample is representative of the population.

While performing a substantive test of details during an audit, the auditor determined that the sample results supported the conclusion that the recorded account balance was materially misstated. Which of the following is the least likely auditor reaction to this discovery?

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.

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

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