Question 1

Which of the following statements is correct concerning statistical sampling in tests of controls?

Accepted Answer

A) As the population size increases, the sample size should increase proportionately. 
B) Deviations from specific internal control procedures at a given rate ordinarily result in misstatements at a lower rate. 
C) There is an inverse relationship between the expected population deviation rate and the sample size. 
D) In determining tolerable deviation rate, an auditor considers detection risk and the sample size. 
A) As the population size increases, the sample size should increase proportionately. 
B) Deviations from specific internal control procedures at a given rate ordinarily result in misstatements at a lower rate. 
C) There is an inverse relationship between the expected population deviation rate and the sample size. 
D) In determining tolerable deviation rate, an auditor considers detection risk and the sample size.

Question 2

Audit sampling is commonly used to gather scanning audit evidence.

Accepted Answer

A) True 
 B)False

Question 3

Confidence level is the complement of sampling risk.

Accepted Answer

A) True 
 B)False

Question 4

"Computer assisted audit techniques and audit data analytics have steadily reduced the number of situations in which audit sampling is necessary and, in the future, will probably eliminate the need for auditors to rely on sampling." Defend or refute the preceding statement.

Accepted Answer

Computer assisted audit techniques and a

Question 5

An auditor who uses statistical sampling for attributes in testing internal controls is most likely to reduce the planned reliance on a prescribed control when the:

Accepted Answer

A) sample deviation rate plus the allowance for sampling risk equals the tolerable deviation rate. 
B) sample deviation rate is less than the expected population deviation rate used in planning the sample. 
C) tolerable deviation rate less the allowance for sampling risk exceeds the sample deviation rate. 
D) sample deviation rate plus the allowance for sampling risk exceeds the tolerable deviation rate. 
A) sample deviation rate plus the allowance for sampling risk equals the tolerable deviation rate. 
B) sample deviation rate is less than the expected population deviation rate used in planning the sample. 
C) tolerable deviation rate less the allowance for sampling risk exceeds the sample deviation rate. 
D) sample deviation rate plus the allowance for sampling risk exceeds the tolerable deviation rate.

Question 6

With a nonstatistical sampling application, the auditor relies on professional judgment rather than the laws of probability to reach a conclusion about the audit test.

Accepted Answer

A) True 
 B)False

Question 7

For an attributes sampling plan, the tolerable deviation rate is 4.5%, the computed upper deviation rate is 7%, the sample deviation rate is 3%, and the desired confidence level is 95%. What is the allowance for sampling risk included in the computed upper deviation rate?

Accepted Answer

A) 1)5%. 
B) 3%. 
C) 4%. 
D) 5%. 
A) 1)5%. 
B) 3%. 
C) 4%. 
D) 5%.

Question 8

Which of the following combinations guarantees a larger sample size?

Accepted Answer

A) Decrease the desired confidence level and decrease the tolerable deviation rate. 
B) Increase the desired confidence level and decrease the tolerable deviation rate. 
C) Decrease the desired confidence level and increase the expected deviation rate. 
D) Increase the tolerable deviation rate and increase the expected deviation rate. 
A) Decrease the desired confidence level and decrease the tolerable deviation rate. 
B) Increase the desired confidence level and decrease the tolerable deviation rate. 
C) Decrease the desired confidence level and increase the expected deviation rate. 
D) Increase the tolerable deviation rate and increase the expected deviation rate.

Question 9

In attributes sampling, population size has little or no effect on sample size once the population exceeds approximately:

Accepted Answer

A) 1,000. 
B) 5,000. 
C) 100,000. 
D) 1,000,000. 
A) 1,000. 
B) 5,000. 
C) 100,000. 
D) 1,000,000.

Question 10

Which of the following risks is related to effectiveness of testing?

Accepted Answer

A) The risk of incorrect rejection. 
B) Inherent risk. 
C) The risk of incorrect acceptance. 
D) None of these. 
A) The risk of incorrect rejection. 
B) Inherent risk. 
C) The risk of incorrect acceptance. 
D) None of these.

Question 11

Define sampling risk and nonsampling risk.

Accepted Answer

Sampling risk refers to the possibility

Question 12

Which of the following best illustrates the concept of sampling risk?

Accepted Answer

A) A randomly chosen sample may not be representative of the population as a whole (regarding the characteristic being tested). 
B) An auditor may select audit procedures that are not appropriate to achieve the specific objective. 
C) An auditor may fail to recognize errors in the documents examined for the chosen sample. 
D) The documents related to the chosen sample may not be available for inspection. 
A) A randomly chosen sample may not be representative of the population as a whole (regarding the characteristic being tested). 
B) An auditor may select audit procedures that are not appropriate to achieve the specific objective. 
C) An auditor may fail to recognize errors in the documents examined for the chosen sample. 
D) The documents related to the chosen sample may not be available for inspection.

Question 13

As a result of tests of controls, an auditor over relied on internal control and decreased substantive testing. This overreliance occurred because the true deviation rate in the population was:

Accepted Answer

A) less than the risk of assessing control risk too low on the auditor's sample. 
B) less than the deviation rate in the auditor's sample. 
C) more than the risk of assessing control risk too low on the auditor's sample. 
D) more than the deviation rate in the auditor's sample. 
A) less than the risk of assessing control risk too low on the auditor's sample. 
B) less than the deviation rate in the auditor's sample. 
C) more than the risk of assessing control risk too low on the auditor's sample. 
D) more than the deviation rate in the auditor's sample.

Question 14

Which of the following best describes the distinguishing feature of statistical sampling?

Accepted Answer

A) It requires the examination of a smaller number of supporting documents. 
B) It permits the auditor to use the most efficient sample size and to quantify the sampling risk to reach a statistical conclusion about the population. 
C) It reduces the problems associated with the auditor's judgment concerning materiality. 
D) It is evaluated in terms of two parameters: statistical mean and random selection. 
A) It requires the examination of a smaller number of supporting documents. 
B) It permits the auditor to use the most efficient sample size and to quantify the sampling risk to reach a statistical conclusion about the population. 
C) It reduces the problems associated with the auditor's judgment concerning materiality. 
D) It is evaluated in terms of two parameters: statistical mean and random selection.

Question 15

In determining the sample size for a test of controls, an auditor should consider the expected population deviation rate, desired confidence level, and the:

Accepted Answer

A) tolerable deviation rate. 
B) risk of incorrect acceptance. 
C) nature and cause of deviations. 
D) population size. 
A) tolerable deviation rate. 
B) risk of incorrect acceptance. 
C) nature and cause of deviations. 
D) population size.

Question 16

If the size of the sample to be used in a particular test of controls has not been determined by utilizing statistical concepts, but the sample has been chosen in accordance with random selection procedures:

Accepted Answer

A) no inferences can be drawn from the sample. 
B) the auditor has committed a nonsampling error. 
C) depending on the size of the sample chosen, the auditor may actually achieve desired precision. 
D) the auditor will have to evaluate the results by reference to the principles of discovery sampling. 
A) no inferences can be drawn from the sample. 
B) the auditor has committed a nonsampling error. 
C) depending on the size of the sample chosen, the auditor may actually achieve desired precision. 
D) the auditor will have to evaluate the results by reference to the principles of discovery sampling.

Question 17

An auditor plans to examine a sample of 20 checks for countersignatures as prescribed by the entity's internal control procedures. One of the checks in the chosen sample of 20 cannot be found. The auditor should consider the reasons for this limitation and:

Accepted Answer

A) evaluate the results as if the sample size had been 19. 
B) treat the missing check as a deviation for the purpose of evaluating the sample. 
C) treat the missing check in the same manner as the majority of the other 19 checks (i.e., countersigned or not). 
D) choose another check to replace the missing check in the sample. 
A) evaluate the results as if the sample size had been 19. 
B) treat the missing check as a deviation for the purpose of evaluating the sample. 
C) treat the missing check in the same manner as the majority of the other 19 checks (i.e., countersigned or not). 
D) choose another check to replace the missing check in the sample.

Question 18

A Type II error is the risk of incorrect acceptance.

Accepted Answer

A) True 
 B)False

Question 19

Harvey Jones, CPA, uses statistical sampling to test control procedures. What is a benefit of using statistical sampling?

Accepted Answer

A) It provides a means of mathematically measuring the sampling risk that result from examining only a part of the data. 
B) It eliminates the use of judgment required of Jones because the AICPA has established numerical criteria for this type of testing. 
C) It increases Jones' knowledge of the entity's prescribed procedures and their limitations. 
D) It is required by generally accepted auditing standards. 
A) It provides a means of mathematically measuring the sampling risk that result from examining only a part of the data. 
B) It eliminates the use of judgment required of Jones because the AICPA has established numerical criteria for this type of testing. 
C) It increases Jones' knowledge of the entity's prescribed procedures and their limitations. 
D) It is required by generally accepted auditing standards.

Question 20

Your manager, Sally, believes that nonstatistical sampling is the best method to use on the audit of YaYa Corporation. You, however, believe that statistical sampling is by far the better method. In addition, you have a great deal of training in the proper use of sampling techniques. Prepare an argument to convince Sally why statistical sampling should be used.

Accepted Answer

Statistical sampling permits the auditor

Which of the following statements is correct concerning statistical sampling in tests of controls?

Audit sampling is commonly used to gather scanning audit evidence.

Confidence level is the complement of sampling risk.

"Computer assisted audit techniques and audit data analytics have steadily reduced the number of situations in which audit sampling is necessary and, in the future, will probably eliminate the need for auditors to rely on sampling." Defend or refute the preceding statement.

An auditor who uses statistical sampling for attributes in testing internal controls is most likely to reduce the planned reliance on a prescribed control when the:

With a nonstatistical sampling application, the auditor relies on professional judgment rather than the laws of probability to reach a conclusion about the audit test.

For an attributes sampling plan, the tolerable deviation rate is 4.5%, the computed upper deviation rate is 7%, the sample deviation rate is 3%, and the desired confidence level is 95%. What is the allowance for sampling risk included in the computed upper deviation rate?

Which of the following combinations guarantees a larger sample size?

In attributes sampling, population size has little or no effect on sample size once the population exceeds approximately:

Which of the following risks is related to effectiveness of testing?

Define sampling risk and nonsampling risk.

Which of the following best illustrates the concept of sampling risk?

As a result of tests of controls, an auditor over relied on internal control and decreased substantive testing. This overreliance occurred because the true deviation rate in the population was:

Which of the following best describes the distinguishing feature of statistical sampling?

In determining the sample size for a test of controls, an auditor should consider the expected population deviation rate, desired confidence level, and the:

If the size of the sample to be used in a particular test of controls has not been determined by utilizing statistical concepts, but the sample has been chosen in accordance with random selection procedures:

An auditor plans to examine a sample of 20 checks for countersignatures as prescribed by the entity's internal control procedures. One of the checks in the chosen sample of 20 cannot be found. The auditor should consider the reasons for this limitation and:

A Type II error is the risk of incorrect acceptance.

Harvey Jones, CPA, uses statistical sampling to test control procedures. What is a benefit of using statistical sampling?

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Auditing the Inventory Management Process

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting Process: Long-Term Liabilities, Stockholders' Equity, and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct, Independence, and Quality Control

Legal Liability

Assurance, Attestation, and Internal Auditing Services

Filters

Exam 8: Audit Sampling: An Overview and Application to Tests of Controls

Which of the following statements is correct concerning statistical sampling in tests of controls?

Audit sampling is commonly used to gather scanning audit evidence.

Confidence level is the complement of sampling risk.

"Computer assisted audit techniques and audit data analytics have steadily reduced the number of situations in which audit sampling is necessary and, in the future, will probably eliminate the need for auditors to rely on sampling." Defend or refute the preceding statement.

An auditor who uses statistical sampling for attributes in testing internal controls is most likely to reduce the planned reliance on a prescribed control when the:

With a nonstatistical sampling application, the auditor relies on professional judgment rather than the laws of probability to reach a conclusion about the audit test.

For an attributes sampling plan, the tolerable deviation rate is 4.5%, the computed upper deviation rate is 7%, the sample deviation rate is 3%, and the desired confidence level is 95%. What is the allowance for sampling risk included in the computed upper deviation rate?

Which of the following combinations guarantees a larger sample size?

In attributes sampling, population size has little or no effect on sample size once the population exceeds approximately:

Which of the following risks is related to effectiveness of testing?

Define sampling risk and nonsampling risk.

Which of the following best illustrates the concept of sampling risk?

As a result of tests of controls, an auditor over relied on internal control and decreased substantive testing. This overreliance occurred because the true deviation rate in the population was:

Which of the following best describes the distinguishing feature of statistical sampling?

In determining the sample size for a test of controls, an auditor should consider the expected population deviation rate, desired confidence level, and the:

If the size of the sample to be used in a particular test of controls has not been determined by utilizing statistical concepts, but the sample has been chosen in accordance with random selection procedures:

An auditor plans to examine a sample of 20 checks for countersignatures as prescribed by the entity's internal control procedures. One of the checks in the chosen sample of 20 cannot be found. The auditor should consider the reasons for this limitation and:

A Type II error is the risk of incorrect acceptance.

Harvey Jones, CPA, uses statistical sampling to test control procedures. What is a benefit of using statistical sampling?

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Auditing the Inventory Management Process

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting Process: Long-Term Liabilities, Stockholders' Equity, and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct, Independence, and Quality Control

Legal Liability

Assurance, Attestation, and Internal Auditing Services

Filters