Exam 18: Attributes Sampling

An erroneous decision to assess control risk at excessively high levels can have an adverse effect on

The audit team is planning to examine a sample of control policies and procedures.Assume that the audit team establishes a tolerable rate of deviation of 6% and,based on past audits,estimates the expected population deviation rate to be 2%.Which of the following is not true with respect to the impact of the risk of overreliance on sample size?

For which of the following audit tests would an auditor most likely use attributes sampling?

Samples to test internal control procedures are intended to provide a basis for an auditor to conclude whether

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

Mary Todd is auditing White House Furniture.In selecting a sample of purchases,she finds that a purchase order is missing.She should

(Appendix)Smith,CPA,is using attributes sampling to test Swimmer Inc.,internal controls related to the accuracy of sales invoices.Smith defined the population as all 5,000 of Swimmer's sales invoices and determined the appropriate sample size was 200 invoices.What is Smith's sampling interval if systematic random selection is used?

An auditor wanted to test credit approval on 10,000 sales invoices processed during the year.The auditor designed a statistical sample that would provide a 1% risk of overreliance (99% confidence)that not more than 7% of the sales invoices lacked approval.The auditor estimated from previous experience that about 2.5% of the sales invoices lacked approval.A sample of 200 invoices was examined and 7 of them were lacking approval.The auditor then determined the upper limit rate of deviation to be 8%. The allowance for sampling risk was

Which of the following is true with respect to the use of sequential sampling when used with attributes sampling?

Indicate how each of the following conditions affect sample size by using the letters I (increase),D (decrease),or N (no effect).For each condition,hold all other factors constant. ____ 1.Holmes is expecting more deviations in the population from prior years because the client has recently implemented a new transaction processing system. ____ 2.Holmes has been criticized for going over budget in the past so he has decreased the risk of underreliance from 15% to 5%. ____ 3.At the beginning of the period,the client hired a new accounting manager to oversee the implementation of policies and procedures relating to accurate and complete financial reporting.Holmes believes the new manager has helped decrease employee errors. ____ 4.Holmes has decided that the tolerable rate of deviation was set too low initially and should be increased slightly to better reflect the planned level of control risk. ____ 5.Holmes defined the population as all sales invoices found in the client's computerized listing.However,the first list he received did not include sales made during the last two weeks of the period.When an updated list was provided the population (which was already large)increased by 5%. ____ 6.The risk of overreliance has been decreased because Holmes wants to place more reliance on the controls being tested. ____ 7.Due to a change in firm policy,the tolerable rate of deviation has been decreased.

As a result of tests of controls,an auditor assessed control risk too low and decreased substantive procedures.This assessment occurred because the true deviation rate in the population was

The sample size for a test of controls varies inversely with

In order for the auditor to decide to perform tests of controls,which of the following relationships should exist?

(Appendix)In each of the following situations,indicate whether Walters,CPA is using unrestricted random (UR),systematic random (SR),haphazard (H),or block (B)selection. ____ 1.Walters created a list of all sales invoices to verify that they were supported by the appropriate shipping documents.Invoice number 15 was selected first for examination,followed by the invoices numbered 30,45,60,75,90,and so on until 40 invoices had been selected. ____ 2.To test the occurrence assertion regarding sales invoices,Walters randomly selected invoices from the database storage disk for examination. ____ 3.To ensure proper authorization of payroll functions,Walters selected all transactions during the last 5 days of each pay period to be included in the sample. ____ 4.Sales invoices are commonly stored in a filing cabinet during the 30-day return period before being input in the company's database.To ensure the 30-day return period was not exceeded,Walters decided to pull a few invoices from each drawer until the desired sample size was collected for examination. ____ 5.T&T Company's purchase orders are already pre-numbered and listed in numerical order within the company's database.As a result,Walters was able to use one of the firm's computer programs to identify random numbers and match each number with a corresponding purchase order to test the accuracy assertion. ____ 6.Using a random number table,Walters identified a series of 50 numbers and located the corresponding employee identification number to select time cards for examination. ____ 7.Walters used a computer listing of T&T's credit memos,which totaled 2,400 items,to select 4 random starting points for examination.The remaining memos were identified for testing by selecting every 24^th item until the sample size reached 100 memos.

Indicate whether each of the following characteristics relate to the risk of overreliance (O),risk of underreliance (U),both (B),or neither (N). ____ 1.Is specifically considered by the auditor in determining sample size and evaluating sample results. ____ 2.Is characterized by the auditor's sample indicating that the control is functioning effectively. ____ 3.Results in the auditor drawing an incorrect conclusion with respect to the population being examined. ____ 4.Is also referred to as the risk of assessing control risk too high. ____ 5.Results in an effectiveness loss to the auditor. ____ 6.Is used to determine the appropriate sample selection method. ____ 7.Is characterized by the population deviation rate being less than the tolerable rate of deviation. ____ 8.Is an example of a sampling risk to which the auditor is exposed when performing tests of controls.

When performing attributes sampling,the appropriate AICPA Sample Size table is initially selected based on the auditors' assessment of the

The audit team is planning to examine a sample of control policies and procedures.Assume that,based on the intended degree of reliance on internal control,the audit team wishes to control the risk of overreliance to 5% and,based on past audits,estimates the expected population deviation rate to be 2%.Initially,the audit team was planning for a moderate degree of reliance on internal control and established a tolerable rate of deviation of 7%; however,it is considering increasing its reliance on internal control and reducing the tolerable rate of deviation to 4%.Which of the following is not true with respect to the impact of the reduction in the tolerable rate of deviation on sample size?

Williams,CPA,determined that the appropriate samples size for a test of controls related to the completeness of purchase transactions was 148 items.Using the AICPA Sample Size tables,which of the following represent assessments that could have been made by Williams to determine this sample size?

Which of the following statements is correct regarding an audit team's documentation requirements for attributes sampling?

When an auditor increases the assessed level of control risk because certain control procedures were determined to be ineffective,the auditor would most likely increase the