Question 1

The purpose of stratification is to permit auditors to emphasize certain aspects of a population and deemphasize others.

Accepted Answer

A) True 
 B)False

Question 2

Acceptable audit risk and acceptable risk of incorrect acceptance are inversely related; that is,as AAR increases,ARIA decreases.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A)  Variables sampling 
B)  Attributes sampling 
C)  Monetary unit sampling 
D)  Sampling with probability proportional to size 
A)  Variables sampling 
B)  Attributes sampling 
C)  Monetary unit sampling 
D)  Sampling with probability proportional to size

Question 4

In monetary unit sampling,the likelihood of high dollar items from the population being included in the sample is lower than the likelihood for small dollar items.

Accepted Answer

A) True 
 B)False

Question 5

The sample size is inversely related to the computed precision interval in difference estimation; that is,as sample size increases,the computed precision interval decreases.

Accepted Answer

A) True 
 B)False

Question 6

The statistical methods used to evaluate monetary unit samples:

Accepted Answer

A)  neither exclude nor include units twice. 
B)  may permit the inclusion of a unit in the sample more than once. 
C)  do not permit a unit to be included in the sample more than once. 
D)  ignore the possibility that a unit may be included in a sample more than once. 
A)  neither exclude nor include units twice. 
B)  may permit the inclusion of a unit in the sample more than once. 
C)  do not permit a unit to be included in the sample more than once. 
D)  ignore the possibility that a unit may be included in a sample more than once.

Question 7

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:

Accepted Answer

A)  $12,000. 
B)  $6,000. 
C)  $10,000. 
D)  $3,000. 
A)  $12,000. 
B)  $6,000. 
C)  $10,000. 
D)  $3,000.

Question 8

When working with the different variables methods:

Accepted Answer

A)  difference estimation frequently results in larger sample sizes than any other method. 
B)  ratio estimation is the method preferred by most auditors since it is simpler to calculate confidence intervals. 
C)  the difference between the mean-per-unit estimate and the difference estimate is the definition of what is being measured. 
D)  stratification can only be used with difference estimation. 
A)  difference estimation frequently results in larger sample sizes than any other method. 
B)  ratio estimation is the method preferred by most auditors since it is simpler to calculate confidence intervals. 
C)  the difference between the mean-per-unit estimate and the difference estimate is the definition of what is being measured. 
D)  stratification can only be used with difference estimation.

Question 9

If an auditor concludes that internal controls are likely to be effective,the preliminary assessment of control risk can be reduced,leading to which of the following impacts on the acceptable risk of incorrect acceptance?

Accepted Answer

A)  The acceptable risk of incorrect acceptance will be reduced. 
B)  The acceptable risk of incorrect acceptance will be increased. 
C)  The acceptable risk of incorrect acceptance will be eliminated. 
D)  The acceptable risk of incorrect acceptance will not be impacted. 
A)  The acceptable risk of incorrect acceptance will be reduced. 
B)  The acceptable risk of incorrect acceptance will be increased. 
C)  The acceptable risk of incorrect acceptance will be eliminated. 
D)  The acceptable risk of incorrect acceptance will not be impacted.

Question 10

Explain acceptable risk of incorrect acceptance and acceptable risk of incorrect rejection within the context of variables sampling.

Accepted Answer

After an audit test is performed and sta

Question 11

The word below that best explains the relationship between required sample size and the acceptable risk of incorrect acceptance is:

Accepted Answer

A)  inverse. 
B)  direct. 
C)  proportional. 
D)  indeterminate. 
A)  inverse. 
B)  direct. 
C)  proportional. 
D)  indeterminate.

Question 12

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?

Accepted Answer

A)  Perform expanded audit tests in the relevant areas. 
B)  Increase detection risk in the relevant areas. 
C)  Increase the sample size. 
D)  Take no action until tests of other audit areas are completed. 
A)  Perform expanded audit tests in the relevant areas. 
B)  Increase detection risk in the relevant areas. 
C)  Increase the sample size. 
D)  Take no action until tests of other audit areas are completed.

Question 13

The larger the sample size,the more confident the auditor can be that the point estimate is close to the true population value.

Accepted Answer

A) True 
 B)False

Question 14

When selecting a stratified sample,the sample size is:

Accepted Answer

A)  determined for the unstratified population and then apportioned to each stratum. 
B)  determined for each stratum and selected from that stratum. 
C)  determined for each stratum and selected randomly from the entire unstratified population. 
D)  always larger than if unstratified sampling had been used. 
A)  determined for the unstratified population and then apportioned to each stratum. 
B)  determined for each stratum and selected from that stratum. 
C)  determined for each stratum and selected randomly from the entire unstratified population. 
D)  always larger than if unstratified sampling had been used.

Question 15

When using difference estimation,the precision interval is calculated by a statistical formula.

Accepted Answer

A) True 
 B)False

Question 16

When selecting a sample size for substantive tests of balances which factor,other factors being equal,would result in a larger sample?

Accepted Answer

A)  A decrease in the tolerable misstatement 
B)  Small expected misstatements 
C)  An increase in the tolerable misstatement 
D)  An increase in the acceptable risk of incorrect acceptance 
A)  A decrease in the tolerable misstatement 
B)  Small expected misstatements 
C)  An increase in the tolerable misstatement 
D)  An increase in the acceptable risk of incorrect acceptance

Question 17

There are 14 steps to audit sampling for 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.

Accepted Answer

The steps comprising the "plan the sampl

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

There are four steps to generalize from the sample to the population using difference estimation sampling.Identify each of these four steps.

Accepted Answer

The four steps to generalize from the sa

Question 20

If the misstatement bound exceeds tolerable misstatement,the population is considered acceptable.

Accepted Answer

A) True 
 B)False

Exam 17: Audit Sampling for Tests of Details of Balances

The purpose of stratification is to permit auditors to emphasize certain aspects of a population and deemphasize others.

Acceptable audit risk and acceptable risk of incorrect acceptance are inversely related; that is,as AAR increases,ARIA decreases.

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

In monetary unit sampling,the likelihood of high dollar items from the population being included in the sample is lower than the likelihood for small dollar items.

The sample size is inversely related to the computed precision interval in difference estimation; that is,as sample size increases,the computed precision interval decreases.

The statistical methods used to evaluate monetary unit samples:

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 working with the different variables methods:

If an auditor concludes that internal controls are likely to be effective,the preliminary assessment of control risk can be reduced,leading to which of the following impacts on the acceptable risk of incorrect acceptance?

Explain acceptable risk of incorrect acceptance and acceptable risk of incorrect rejection within the context of variables sampling.

The word below that best explains the relationship between required sample size and the acceptable risk of incorrect acceptance is:

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?

The larger the sample size,the more confident the auditor can be that the point estimate is close to the true population value.

When selecting a stratified sample,the sample size is:

When using difference estimation,the precision interval is calculated by a statistical formula.

When selecting a sample size for substantive tests of balances which factor,other factors being equal,would result in a larger sample?

There are 14 steps to audit sampling for 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.

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

There are four steps to generalize from the sample to the population using difference estimation sampling.Identify each of these four steps.

If the misstatement bound exceeds tolerable misstatement,the population is considered acceptable.

The Assurance Services Market

The Audit Standards Setting Process

Audit Reports

Legal Liability Considerations for Auditors

Ethics and the Audit Profession

Audit Responsibilities and Objectives

Nature and Type of Audit Evidence

Audit Planning

Considering Materiality and Audit Risk

Considering Internal Control

Considering the Risk of Fraud

Implications of Information Technology for the Audit Process

Developing the Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

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 Inventory and Warehousing Cycle

Audit of the Payroll and Personnel Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Audit Completion

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Internal and Governmental Financial Auditing and Operational Auditing

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