Question 1

The risk of incorrect rejection typically results in an efficiency loss for the auditor.

Accepted Answer

A) True 
 B)False

Question 2

The auditor's sample would indicate that the client's account balance is fairly stated when the _______________________ is less than the ______________________.

Accepted Answer

A)  upper limit on misstatement, tolerable misstatement. 
B)  actual misstatement, tolerable misstatement. 
C)  tolerable misstatement, upper limit on misstatement. 
D)  tolerable misstatement, actual misstatement. 
A)  upper limit on misstatement, tolerable misstatement. 
B)  actual misstatement, tolerable misstatement. 
C)  tolerable misstatement, upper limit on misstatement. 
D)  tolerable misstatement, actual misstatement.

Question 3

The ______________________________ is the difference between the recorded balance and the audited balance of a component or transaction.

Accepted Answer

The answer of The ______________________________ is the difference between the...

Question 4

When the audit risk is 0.015,inherent risk is 0.50,control risk is 0.30 ,and analytical procedures risk is 0.50,the risk of incorrect acceptance is

Accepted Answer

A)  0.02. 
B)  0.20. 
C)  0.50. 
D)  2.00. 
A)  0.02. 
B)  0.20. 
C)  0.50. 
D)  2.00.

Question 5

W.Fire,CPA is examining the accounts receivable (which were recorded at $500,000)for TBB,Inc.,using a monetary unit sampling application.Using a risk of incorrect acceptance of 5% and a tolerable misstatement of $50,000,Fire has determined a sample size of 100 items and found the following three misstatements   a.What sampling interval did Fire use?
b.Based on the preceding information,calculate the (1)actual misstatement,(2)projected misstatement,(3)incremental allowance for sampling risk,and (4)basic allowance for sampling risk.
c.What is the upper limit on misstatement?
d.Based on the preceding information,what would Fire's conclusion be with respect to TBB's accounts receivable balance?

Accepted Answer

a.Sampling interval = $500,000 ÷ 100 ite

Question 6

An auditor may decide to increase the risk of incorrect rejection when

Accepted Answer

A)  Increased reliability from the sample is desired. 
B)  Many differences are expected. 
C)  Initial sample results do not support the planned level of control risk. 
D)  The cost and effort of selecting additional items is low. 
A)  Increased reliability from the sample is desired. 
B)  Many differences are expected. 
C)  Initial sample results do not support the planned level of control risk. 
D)  The cost and effort of selecting additional items is low.

Question 7

If a customer's account was recorded at $45,000,the audited value was $30,000,and the sampling interval was $30,000,the projected misstatement would be

Accepted Answer

A)  $10,000. 
B)  $15,000. 
C)  $20,000. 
D)  $30,000. 
A)  $10,000. 
B)  $15,000. 
C)  $20,000. 
D)  $30,000.

Question 8

Which of the following would not cause the audit team to select a larger sample of items under a monetary unit sampling application?

Accepted Answer

A)  A reduction in the risk of incorrect acceptance from 10 percent to 5 percent. 
B)  An increase in the tolerable misstatement from $30,000 to $60,000. 
C)  An increase in the expected misstatement from $20,000 to $40,000. 
D)  All of the above would result in selecting a larger sample. 
A)  A reduction in the risk of incorrect acceptance from 10 percent to 5 percent. 
B)  An increase in the tolerable misstatement from $30,000 to $60,000. 
C)  An increase in the expected misstatement from $20,000 to $40,000. 
D)  All of the above would result in selecting a larger sample.

Question 9

How does monetary unit sampling (MUS)ensure that larger dollar components are selected for examination?

Accepted Answer

A)  It requires the auditor to identify all items having a balance higher than performance materiality prior to beginning the sample selection process. 
B)  It requires the auditor to stratify the sample into larger and smaller dollar components prior to beginning the sample selection process. 
C)  It defines the sampling unit as an individual dollar within an account balance or class of transactions. 
D)  It selects components having large balances in the prior audit. 
A)  It requires the auditor to identify all items having a balance higher than performance materiality prior to beginning the sample selection process. 
B)  It requires the auditor to stratify the sample into larger and smaller dollar components prior to beginning the sample selection process. 
C)  It defines the sampling unit as an individual dollar within an account balance or class of transactions. 
D)  It selects components having large balances in the prior audit.

Question 10

Which of the following expresses the relationship between changes in the factors and changes in sample size in variables sampling?

Accepted Answer

A)  Tolerable misstatement, direct; expected error, inverse; risk of incorrect rejection, direct. 
B)  Tolerable misstatement, inverse; expected error, direct; risk of incorrect rejection, inverse. 
C)  Tolerable misstatement, inverse; expected error, inverse; risk of incorrect rejection, inverse. 
D)  Tolerable misstatement, inverse; expected error, inverse; risk of incorrect rejection, direct. 
A)  Tolerable misstatement, direct; expected error, inverse; risk of incorrect rejection, direct. 
B)  Tolerable misstatement, inverse; expected error, direct; risk of incorrect rejection, inverse. 
C)  Tolerable misstatement, inverse; expected error, inverse; risk of incorrect rejection, inverse. 
D)  Tolerable misstatement, inverse; expected error, inverse; risk of incorrect rejection, direct.

Question 11

A component of an account balance has a recorded balance of $10,000 and an audited balance of $8,000.Using MUS,if the sampling interval is $20,000,the projected misstatement would be

Accepted Answer

A)  $2,000. 
B)  $4,000. 
C)  $5,000. 
D)  $10,000. 
A)  $2,000. 
B)  $4,000. 
C)  $5,000. 
D)  $10,000.

Question 12

Which of the following is an advantage of monetary unit sampling (MUS)?

Accepted Answer

A)  It provides a conservative (higher) estimate of misstatement in the account balance or class of transactions. 
B)  Its samples typically include transactions or components reflecting relatively large dollar amounts. 
C)  It does not require the auditor to estimate the amount of misstatement in the account balance or class of transactions. 
D)  It is effective in identifying misstatements in accounts for which understatement is a primary concern (such as liabilities). 
A)  It provides a conservative (higher) estimate of misstatement in the account balance or class of transactions. 
B)  Its samples typically include transactions or components reflecting relatively large dollar amounts. 
C)  It does not require the auditor to estimate the amount of misstatement in the account balance or class of transactions. 
D)  It is effective in identifying misstatements in accounts for which understatement is a primary concern (such as liabilities).

Question 13

Monetary unit samples are selected using a form of systematic random selection.

Accepted Answer

A) True 
 B)False

Question 14

K.Brown,CPA,was using monetary unit sampling (MUS)to audit an inventory of $3,000,000 composed of 6,000 items.A sample size of 500 was determined and a tolerable misstatement of $20,000 was established.The sampling interval would be

Accepted Answer

A)  $500. 
B)  $5,000. 
C)  $6,000. 
D)  $20,000. 
A)  $500. 
B)  $5,000. 
C)  $6,000. 
D)  $20,000.

Question 15

The amount by which a projected misstatement in an account balance or class of transactions differs from an actual misstatement as a result of the sample not being representative of the population would typically arise from

Accepted Answer

A)  A misunderstanding of accounting principles. 
B)  Sampling risk. 
C)  Management override of an internal control policy or procedure. 
D)  Risk of incorrect acceptance. 
A)  A misunderstanding of accounting principles. 
B)  Sampling risk. 
C)  Management override of an internal control policy or procedure. 
D)  Risk of incorrect acceptance.

Question 16

Under monetary unit sampling,the auditor uses a(n)___________________________________ selection method to select sample items.

Accepted Answer

The answer of Under monetary unit sampling,the auditor uses a(n)___________________________________...

Question 17

Expected misstatement has a(n)_______________ relationship with sample size.

Accepted Answer

The answer of Expected misstatement has a(n)_______________ relationship with sample...

Question 18

Stratifying the sample allows the auditor to reduce the overall sample size required in a classical variables sampling application.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is true with respect to the risk of incorrect acceptance?

Accepted Answer

A)  The risk of incorrect acceptance is determined in the planning stages of the audit prior to the study of internal control. 
B)  The risk of incorrect acceptance has an inverse relationship with sample size. 
C)  The risk of incorrect acceptance exposes the auditor to an efficiency loss. 
D)  The risk of incorrect acceptance may occur when the true (but unknown) account balance is fairly stated. 
A)  The risk of incorrect acceptance is determined in the planning stages of the audit prior to the study of internal control. 
B)  The risk of incorrect acceptance has an inverse relationship with sample size. 
C)  The risk of incorrect acceptance exposes the auditor to an efficiency loss. 
D)  The risk of incorrect acceptance may occur when the true (but unknown) account balance is fairly stated.

Question 20

_________________________________ sampling methods use normal distribution theory and the central limit theorem to provide a range estimate of either the recorded balance of the account balance or class of transactions or the misstatement in the account balance or class of transactions.

Accepted Answer

The answer of _________________________________ sampling methods use normal distribution theory...

The risk of incorrect rejection typically results in an efficiency loss for the auditor.

The auditor's sample would indicate that the client's account balance is fairly stated when the _ is less than the .

The ______________________________ is the difference between the recorded balance and the audited balance of a component or transaction.

When the audit risk is 0.015,inherent risk is 0.50,control risk is 0.30 ,and analytical procedures risk is 0.50,the risk of incorrect acceptance is

An auditor may decide to increase the risk of incorrect rejection when

If a customer's account was recorded at $45,000,the audited value was $30,000,and the sampling interval was $30,000,the projected misstatement would be

Which of the following would not cause the audit team to select a larger sample of items under a monetary unit sampling application?

How does monetary unit sampling (MUS)ensure that larger dollar components are selected for examination?

Which of the following expresses the relationship between changes in the factors and changes in sample size in variables sampling?

A component of an account balance has a recorded balance of $10,000 and an audited balance of $8,000.Using MUS,if the sampling interval is $20,000,the projected misstatement would be

Which of the following is an advantage of monetary unit sampling (MUS)?

Monetary unit samples are selected using a form of systematic random selection.

K.Brown,CPA,was using monetary unit sampling (MUS)to audit an inventory of $3,000,000 composed of 6,000 items.A sample size of 500 was determined and a tolerable misstatement of $20,000 was established.The sampling interval would be

The amount by which a projected misstatement in an account balance or class of transactions differs from an actual misstatement as a result of the sample not being representative of the population would typically arise from

Under monetary unit sampling,the auditor uses a(n)___________________________________ selection method to select sample items.

Expected misstatement has a(n)_______________ relationship with sample size.

Stratifying the sample allows the auditor to reduce the overall sample size required in a classical variables sampling application.

Which of the following is true with respect to the risk of incorrect acceptance?

_________________________________ sampling methods use normal distribution theory and the central limit theorem to provide a range estimate of either the recorded balance of the account balance or class of transactions or the misstatement in the account balance or class of transactions.

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Governmental and Fraud Audits

Overview of Sampling

Attributes Sampling

Auditing in a Computerized Environment

Filters

Exam 19: Variables Sampling

The risk of incorrect rejection typically results in an efficiency loss for the auditor.

The auditor's sample would indicate that the client's account balance is fairly stated when the _______________________ is less than the ______________________.

The ______________________________ is the difference between the recorded balance and the audited balance of a component or transaction.

When the audit risk is 0.015,inherent risk is 0.50,control risk is 0.30 ,and analytical procedures risk is 0.50,the risk of incorrect acceptance is

An auditor may decide to increase the risk of incorrect rejection when

If a customer's account was recorded at $45,000,the audited value was $30,000,and the sampling interval was $30,000,the projected misstatement would be

Which of the following would not cause the audit team to select a larger sample of items under a monetary unit sampling application?

How does monetary unit sampling (MUS)ensure that larger dollar components are selected for examination?

Which of the following expresses the relationship between changes in the factors and changes in sample size in variables sampling?

A component of an account balance has a recorded balance of $10,000 and an audited balance of $8,000.Using MUS,if the sampling interval is $20,000,the projected misstatement would be

Which of the following is an advantage of monetary unit sampling (MUS)?

Monetary unit samples are selected using a form of systematic random selection.

K.Brown,CPA,was using monetary unit sampling (MUS)to audit an inventory of $3,000,000 composed of 6,000 items.A sample size of 500 was determined and a tolerable misstatement of $20,000 was established.The sampling interval would be

The amount by which a projected misstatement in an account balance or class of transactions differs from an actual misstatement as a result of the sample not being representative of the population would typically arise from

Under monetary unit sampling,the auditor uses a(n)___________________________________ selection method to select sample items.

Expected misstatement has a(n)_______________ relationship with sample size.

Stratifying the sample allows the auditor to reduce the overall sample size required in a classical variables sampling application.

Which of the following is true with respect to the risk of incorrect acceptance?

_________________________________ sampling methods use normal distribution theory and the central limit theorem to provide a range estimate of either the recorded balance of the account balance or class of transactions or the misstatement in the account balance or class of transactions.

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Governmental and Fraud Audits

Overview of Sampling

Attributes Sampling

Auditing in a Computerized Environment

Filters

The auditor's sample would indicate that the client's account balance is fairly stated when the _ is less than the .