Question 1

Monetary-unit sampling is based on attribute sampling concepts.

Accepted Answer

A) True 
 B)False  True

Question 2

The purpose of audit sampling is to draw inferences about the entire population from the results of a sample.

Accepted Answer

A) True 
 B)False  True

Question 3

Describe two advantages and two disadvantages of monetary-unit sampling (MUS).

Accepted Answer

Should include two advantages and disadvantages from the following:
Advantages:
1. When the auditor expects no misstatements, MUS sample size can be computed and usually results in a smaller sample size than classical variables sampling.
2. The calculation of the sample size and the evaluation of the sample results are not based on the variation between items in the population.
3. When applied using a probability-proportional-to-size sample selection procedure, MUS automatically results in a stratified sample because sampled items are selected in proportion to their dollar amounts. In effect, larger dollar items have a higher probability of being selected.
Disadvantages:
1. The selection of zero or negative balances generally requires special design consideration.
2. If the auditor detects items that are in error by more than 100 percent, special adjustments will be necessary when calculating sample results.
3. When more than one or two misstatements are detected using a MUS approach, the sample results calculations may overstate the allowance for sampling risk.

Question 4

Using nonstatistical sampling, which of the following courses of action would an auditor most likely follow in planning a sample of cash disbursements if the auditor is aware of several unusually large cash disbursements?

Accepted Answer

A) Set the tolerable deviation rate at a lower level than originally planned. 
B) Identify the large and unusual disbursements as individually significant and test 100 percent. 
C) Increase the sample size to reduce the effect of the unusually large disbursements. 
D) Continue to draw new samples until all the unusually large disbursements appear in the sample. 
A) Set the tolerable deviation rate at a lower level than originally planned. 
B) Identify the large and unusual disbursements as individually significant and test 100 percent. 
C) Increase the sample size to reduce the effect of the unusually large disbursements. 
D) Continue to draw new samples until all the unusually large disbursements appear in the sample.

Question 5

An auditor established a $60,000 tolerable misstatement for an account balance of $1,000,000. The auditor selected a sample of every twentieth item from the population of 1,000 items that represented the asset account balance and discovered overstatements of $3,700 and understatements of $200. Under these circumstances, the auditor most likely would conclude that:

Accepted Answer

A) there is an unacceptably high risk that the actual misstatements in the population exceed the tolerable misstatement because the total projected misstatement is more than the tolerable misstatement. 
B) there is an unacceptably high risk that the tolerable misstatement exceeds the sum of actual overstatements and understatements. 
C) the asset account is fairly stated because the total projected misstatement is less than the tolerable misstatement. 
D) the asset account is fairly stated because the tolerable misstatement exceeds the net of projected actual overstatements and understatements. 
A) there is an unacceptably high risk that the actual misstatements in the population exceed the tolerable misstatement because the total projected misstatement is more than the tolerable misstatement. 
B) there is an unacceptably high risk that the tolerable misstatement exceeds the sum of actual overstatements and understatements. 
C) the asset account is fairly stated because the total projected misstatement is less than the tolerable misstatement. 
D) the asset account is fairly stated because the tolerable misstatement exceeds the net of projected actual overstatements and understatements.

Question 6

The accounting department reports that the balance of accounts receivable is $210,000. You are willing to accept that balance if audit sampling suggests it is within $15,000 of the actual balance. Using a classical variables sampling plan, you compute a 95% confidence interval of $208,000 to $225,000. You would therefore:

Accepted Answer

A) not be able to determine the acceptability of the receivable balance. 
B) accept the balance but with a lower level of confidence. 
C) take a larger sample before totally rejecting the balance and requiring adjustments. 
D) accept the $210,000 balance because the confidence interval is within the materiality limits. 
A) not be able to determine the acceptability of the receivable balance. 
B) accept the balance but with a lower level of confidence. 
C) take a larger sample before totally rejecting the balance and requiring adjustments. 
D) accept the $210,000 balance because the confidence interval is within the materiality limits.

Question 7

A number of factors influence the sample size for a substantive test of details of an account balance. All other factors being equal, which of the following would lead to a larger sample size?

Accepted Answer

A) Greater reliance on internal controls. 
B) Greater reliance on analytical procedures. 
C) Smaller expected frequency of misstatements. 
D) Smaller measure of tolerable misstatements. 
A) Greater reliance on internal controls. 
B) Greater reliance on analytical procedures. 
C) Smaller expected frequency of misstatements. 
D) Smaller measure of tolerable misstatements.

Question 8

Expected misstatement is directly related to sample size.

Accepted Answer

A) True 
 B)False

Question 9

Classical variables sampling uses normal distribution theory to evaluate the characteristics of a population based on sample data.

Accepted Answer

A) True 
 B)False

Question 10

Haphazard selection allows the auditor to select items with bias.

Accepted Answer

A) True 
 B)False

Question 11

In a monetary-unit sample with a sampling interval of $10,000, an auditor discovered that a selected account receivable with a recorded amount of $5,000 had an audit amount of $2,000. The projected misstatement of this sample was:

Accepted Answer

A) $3,000. 
B) $4,000. 
C) $6,000. 
D) $8,000. 
A) $3,000. 
B) $4,000. 
C) $6,000. 
D) $8,000.

Question 12

An auditor is performing substantive procedures of pricing and extension of perpetual inventory balances consisting of a large number of items. Past experience indicates numerous pricing and extension errors. Which of the following statistical sampling approaches is most appropriate?

Accepted Answer

A) Unstratified mean-per-unit. 
B) Monetary-unit sampling. 
C) Stop or go. 
D) Difference projection. 
A) Unstratified mean-per-unit. 
B) Monetary-unit sampling. 
C) Stop or go. 
D) Difference projection.

Question 13

Summarize the concept behind monetary-unit sampling (MUS). How does MUS use attribute-sampling theory?

Accepted Answer

MUS uses attribute-sampling theory to es

Question 14

In statistical or nonstatistical sampling methods used in substantive testing, an auditor most likely would stratify a population into meaningful groups if:

Accepted Answer

A) monetary-unit sampling (MUS)is used. 
B) classical variables sampling is used in order to focus on large items. 
C) the auditor's estimated tolerable misstatement is extremely small. 
D) the standard deviation of recorded amounts is relatively small. 
A) monetary-unit sampling (MUS)is used. 
B) classical variables sampling is used in order to focus on large items. 
C) the auditor's estimated tolerable misstatement is extremely small. 
D) the standard deviation of recorded amounts is relatively small.

Question 15

The size of the upper limit on misstatement is largely dependent on the sample size, which is inversely related to the desired confidence level.

Accepted Answer

A) True 
 B)False

Question 16

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. It was, in fact, not materially misstated. Such a situation illustrates the risk of:

Accepted Answer

A) incorrect rejection. 
B) incorrect acceptance. 
C) assessing control risk too high. 
D) assessing control risk too low. 
A) incorrect rejection. 
B) incorrect acceptance. 
C) assessing control risk too high. 
D) assessing control risk too low.

Question 17

An accounts receivable account balance is $500,000 and the auditor determines a sample size of 30 would provide adequate assurance. The auditor plans to use a monetary-unit sampling plan with systematic sample selection. The auditor notices that there are six customer accounts of at least $15,000 and would like the systematic selection technique to select all items that are at least $15,000, even if that means the sample size is slightly larger than 30. To achieve the auditor's objectives, the sampling interval should be:

Accepted Answer

A) 6) 
B) 20. 
C) 16,666. 
D) 15,000. 
A) 6) 
B) 20. 
C) 16,666. 
D) 15,000.

Question 18

Monetary-unit sampling is said to eliminate the need to stratify the sample because:

Accepted Answer

A) sample items are selected in proportion to their dollar amount. 
B) the risk of incorrect acceptance is inversely related to sample size. 
C) tolerable misstatement is considered when determining sample size. 
D) the upper limit on misstatements can be computed based on statistical principles. 
A) sample items are selected in proportion to their dollar amount. 
B) the risk of incorrect acceptance is inversely related to sample size. 
C) tolerable misstatement is considered when determining sample size. 
D) the upper limit on misstatements can be computed based on statistical principles.

Question 19

Match the following.
-MUS misstatement

Accepted Answer

A) an individual dollar 
B) the total of the projected misstatement plus the allowance for sampling risk 
C) the difference between monetary amounts in the entity's records and amounts supported by audit evidence 
D) the account or transaction that contains the selected dollar 
A) an individual dollar 
B) the total of the projected misstatement plus the allowance for sampling risk 
C) the difference between monetary amounts in the entity's records and amounts supported by audit evidence 
D) the account or transaction that contains the selected dollar

Question 20

The confidence factor for nonstatistical sampling is based on:

Accepted Answer

A) the number of items in the account. 
B) auditor judgment. 
C) the risk of misstatement in the account and the level of desired confidence. 
D) variability in the population and the risk of misstatement in the account. 
A) the number of items in the account. 
B) auditor judgment. 
C) the risk of misstatement in the account and the level of desired confidence. 
D) variability in the population and the risk of misstatement in the account.

Monetary-unit sampling is based on attribute sampling concepts.

The purpose of audit sampling is to draw inferences about the entire population from the results of a sample.

Describe two advantages and two disadvantages of monetary-unit sampling (MUS).

Using nonstatistical sampling, which of the following courses of action would an auditor most likely follow in planning a sample of cash disbursements if the auditor is aware of several unusually large cash disbursements?

A number of factors influence the sample size for a substantive test of details of an account balance. All other factors being equal, which of the following would lead to a larger sample size?

Expected misstatement is directly related to sample size.

Classical variables sampling uses normal distribution theory to evaluate the characteristics of a population based on sample data.

Haphazard selection allows the auditor to select items with bias.

In a monetary-unit sample with a sampling interval of $10,000, an auditor discovered that a selected account receivable with a recorded amount of $5,000 had an audit amount of $2,000. The projected misstatement of this sample was:

An auditor is performing substantive procedures of pricing and extension of perpetual inventory balances consisting of a large number of items. Past experience indicates numerous pricing and extension errors. Which of the following statistical sampling approaches is most appropriate?

Summarize the concept behind monetary-unit sampling (MUS). How does MUS use attribute-sampling theory?

In statistical or nonstatistical sampling methods used in substantive testing, an auditor most likely would stratify a population into meaningful groups if:

The size of the upper limit on misstatement is largely dependent on the sample size, which is inversely related to the desired confidence level.

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. It was, in fact, not materially misstated. Such a situation illustrates the risk of:

Monetary-unit sampling is said to eliminate the need to stratify the sample because:

Match the following. -MUS misstatement

The confidence factor for nonstatistical sampling is based on:

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 Overview and Application to Tests of Controls

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 9: Audit Sampling: An Application to Substantive Tests of Account Balances

Monetary-unit sampling is based on attribute sampling concepts.

The purpose of audit sampling is to draw inferences about the entire population from the results of a sample.

Describe two advantages and two disadvantages of monetary-unit sampling (MUS).

Using nonstatistical sampling, which of the following courses of action would an auditor most likely follow in planning a sample of cash disbursements if the auditor is aware of several unusually large cash disbursements?

A number of factors influence the sample size for a substantive test of details of an account balance. All other factors being equal, which of the following would lead to a larger sample size?

Expected misstatement is directly related to sample size.

Classical variables sampling uses normal distribution theory to evaluate the characteristics of a population based on sample data.

Haphazard selection allows the auditor to select items with bias.

In a monetary-unit sample with a sampling interval of $10,000, an auditor discovered that a selected account receivable with a recorded amount of $5,000 had an audit amount of $2,000. The projected misstatement of this sample was:

An auditor is performing substantive procedures of pricing and extension of perpetual inventory balances consisting of a large number of items. Past experience indicates numerous pricing and extension errors. Which of the following statistical sampling approaches is most appropriate?

Summarize the concept behind monetary-unit sampling (MUS). How does MUS use attribute-sampling theory?

In statistical or nonstatistical sampling methods used in substantive testing, an auditor most likely would stratify a population into meaningful groups if:

The size of the upper limit on misstatement is largely dependent on the sample size, which is inversely related to the desired confidence level.

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. It was, in fact, not materially misstated. Such a situation illustrates the risk of:

Monetary-unit sampling is said to eliminate the need to stratify the sample because:

Match the following. -MUS misstatement

The confidence factor for nonstatistical sampling is based on:

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 Overview and Application to Tests of Controls

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