Exam 19: Variables Sampling

You are planning to use monetary unit sampling (MUS)to evaluate Violet Company's accounts receivable.The accounts receivable account totals $3,000,000.You have assessed a risk of incorrect acceptance of 5 percent,a tolerable misstatement of $120,000,and an expected error of $24,000. a.Calculate the sample size and sampling interval. b.Regardless of your answer to (a),use a sample size of 125 and the related sampling interval and calculate the upper limit on misstatement,assuming that you found the following differences.

The projected misstatement assumes that the sampling interval contains a slightly higher percentage of misstatement than the sample item.

Which of the following sampling methods uses normal distribution theory and the central limit theorem to provide an estimate range of the account balance or class of transactions or the misstatement in the account balance or class of transactions?

Which of the following factors would not result in a reduced sample size in monetary unit sampling?

Indicate whether each of the following factors is considered in determining sample size in monetary unit sampling (M),classical variables sampling (C),both (B),or neither (N). _____ 1.Population size. _____ 2.Standard deviation. _____ 3.Risk of incorrect acceptance. _____ 4.Expected error. _____ 5.Tolerable misstatement. _____ 6.Risk of incorrect rejection. _____ 7.Tainting percentage.

What is the auditor's normal course of action if a "logical unit" is selected twice in MUS sampling?

The unique feature of monetary unit sampling is that

The __________________________ assumes that the entire sampling interval contains the same percentage of misstatement as the item examined by the auditor.

In a classical variables sampling application,the sample size will be smaller when the

Which of the following factors is most likely established based on the results of prior audit examinations?

Two methods of variables sampling are _______________________ sampling and classical variables sampling.

The amount at which an item would be recorded assuming no mistakes in judgment or incorrect applications of generally accepted accounting principles were made is the

Nonstatistical sampling methods are not permitted under generally accepted auditing standards.

H.Brown,CPA,performed a nonstatistical sampling plan to examine the inventory balances of Big Company.Brown audited 50 items from a sample and found an audited value of $18,000.The sample had a recorded value of $20,000.If the entire inventory contained 250 items and the total recorded value of the inventory was $250,000,the estimated account balance using nonstatistical estimation and projecting the error based on number of items examined was

Which of the following set of conditions would provide the auditor the smallest sample size under monetary unit sampling (MUS)(RIA = risk of incorrect acceptance,TM = tolerable misstatement,PS = population size)?

Y.Chang,CPA,performed a nonstatistical sampling plan to examine the inventory balances of PHD,Inc.In selecting the sample of 35 items,Chang used an expected misstatement of $20,000 and a tolerable misstatement of $32,000.The account balance consisted of 525 items totaling $600,000.The sample recorded value was $40,000,and the audited value was $38,000.What conclusion did Chang draw regarding the account balance?

In which of the following situations would the auditor be more likely to use monetary unit sampling (MUS)as opposed to classical variables sampling?

Which of the following statements is not true with respect to the calculation of the upper limit on misstatements?

Which of the following would not result in a lower level of the risk of incorrect acceptance?

When making a decision about the dollar amount in an account balance based on a sample,the audit team considers the risk of incorrect acceptance more serious than the risk of incorrect rejection because