Question 1

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

Accepted Answer

A)  The sampling risk should be less than 5 percent. 
B)  The tolerable rate of deviation should exceed the expected population deviation rate. 
C)  The expected population deviation rate should exceed the risk of overreliance. 
D)  The expected population deviation rate should exceed the tolerable rate of deviation. 
A)  The sampling risk should be less than 5 percent. 
B)  The tolerable rate of deviation should exceed the expected population deviation rate. 
C)  The expected population deviation rate should exceed the risk of overreliance. 
D)  The expected population deviation rate should exceed the tolerable rate of deviation.

Question 2

Taylor LaRussa,an audit manager,considered the control risk assessments listed in the left column of the following table in evaluating
A. Cardinal's internal control over sales transactions. The sample sizes for the substantive procedures of the customer accounts receivable are shown to the right of each control risk. What risk of overreliance (ROO) could be assigned for tests of controls at each control risk level?

Accepted Answer

A)  From top to bottom: 5%, 10%, 1%. 
B)  From top to bottom: 10%, 1%, 5%. 
C)  From top to bottom: 1%, 10%, 5%. 
D)  From top to bottom: 1%, 5%, 10%. 
A)  From top to bottom: 5%, 10%, 1%. 
B)  From top to bottom: 10%, 1%, 5%. 
C)  From top to bottom: 1%, 10%, 5%. 
D)  From top to bottom: 1%, 5%, 10%.

Question 3

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 2½% 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%. In the evaluation of this sample,the auditor decided to increase the level of the preliminary assessment of control risk because the

Accepted Answer

A)  Tolerable rate of deviation (7%) was less than the upper limit rate of deviation (8%). 
B)  Expected population deviation rate (7%) was more than the percentage of errors in the sample (3½%). 
C)  Expected population deviation rate (2½%) was less than the tolerable rate of deviation. 
D)  Upper limit rate of deviation (8%) was more than the percentage of errors in the sample (3½%). 
A)  Tolerable rate of deviation (7%) was less than the upper limit rate of deviation (8%). 
B)  Expected population deviation rate (7%) was more than the percentage of errors in the sample (3½%). 
C)  Expected population deviation rate (2½%) was less than the tolerable rate of deviation. 
D)  Upper limit rate of deviation (8%) was more than the percentage of errors in the sample (3½%).

Question 4

A sampling plan for nonstatistical sampling is the same as statistical sampling except for which of the following steps?

Accepted Answer

A)  Define the characteristic of interest. 
B)  Define the population. 
C)  Measure the sample items. 
D)  Evaluate the sample results. 
A)  Define the characteristic of interest. 
B)  Define the population. 
C)  Measure the sample items. 
D)  Evaluate the sample results.

Question 5

__________________________ sampling is a form of attributes sampling that is used when deviations from controls are very critical yet are expected to occur at a relatively low rate.

Accepted Answer

The answer of __________________________ sampling is a form of attributes...

Question 6

A(n)_____________________ is an instance in which controls are not functioning as intended.

Accepted Answer

The answer of A(n)_____________________ is an instance in which controls...

Question 7

A type of sampling application in which a relatively small initial sample is examined and decisions regarding expanding that sample are based on the results of this initial sample is known as

Accepted Answer

A)  Attributes sampling. 
B)  Discovery sampling. 
C)  Sequential sampling. 
D)  Statistical sampling. 
A)  Attributes sampling. 
B)  Discovery sampling. 
C)  Sequential sampling. 
D)  Statistical sampling.

Question 8

The sample size for a test of controls varies inversely with

Accepted Answer

A)  Expected population deviation rate, yes; tolerable rate of deviation, yes. 
B)  Expected population deviation rate, no; tolerable rate of deviation, no. 
C)  Expected population deviation rate, yes; tolerable rate of deviation, no. 
D)  Expected population deviation rate, no; tolerable rate of deviation, yes. 
A)  Expected population deviation rate, yes; tolerable rate of deviation, yes. 
B)  Expected population deviation rate, no; tolerable rate of deviation, no. 
C)  Expected population deviation rate, yes; tolerable rate of deviation, no. 
D)  Expected population deviation rate, no; tolerable rate of deviation, yes.

Question 9

Attributes sampling is most closely associated with the auditor's substantive procedures.

Accepted Answer

A) True 
 B)False

Question 10

To statistically evaluate an attributes sampling application,the auditor would not need to know

Accepted Answer

A)  The acceptable risk of overreliance. 
B)  The actual deviations in the sample. 
C)  The actual population size. 
D)  The upper limit rate of deviation. 
A)  The acceptable risk of overreliance. 
B)  The actual deviations in the sample. 
C)  The actual population size. 
D)  The upper limit rate of deviation.

Question 11

Why is the audit team more concerned with controlling the exposure to the risk of overreliance than with the risk of underreliance?

Accepted Answer

A)  Only the risk of overreliance results in an incorrect audit decision. 
B)  The risk of underreliance is not related to the audit team's study and evaluation of internal control. 
C)  The risk of overreliance can ultimately result in the audit team's failing to reduce audit risk to acceptable levels. 
D)  The risk of underreliance can be controlled by performing tests of controls during the interim period. 
A)  Only the risk of overreliance results in an incorrect audit decision. 
B)  The risk of underreliance is not related to the audit team's study and evaluation of internal control. 
C)  The risk of overreliance can ultimately result in the audit team's failing to reduce audit risk to acceptable levels. 
D)  The risk of underreliance can be controlled by performing tests of controls during the interim period.

Question 12

The likelihood of assessing control risk too high is the risk that the sample selected to test controls

Accepted Answer

A)  Does not support the auditor's planned level of control risk when the true operating effectiveness of the control justifies such an assessment. 
B)  Contains misstatements that could be material to the financial statements when aggregated with misstatements in other account balances or transaction classes. 
C)  Contains proportionally fewer monetary errors or deviations from prescribed control procedures than exist in the balance or class as a whole. 
D)  Does not support the tolerable misstatement for some or all of management's assertions. 
A)  Does not support the auditor's planned level of control risk when the true operating effectiveness of the control justifies such an assessment. 
B)  Contains misstatements that could be material to the financial statements when aggregated with misstatements in other account balances or transaction classes. 
C)  Contains proportionally fewer monetary errors or deviations from prescribed control procedures than exist in the balance or class as a whole. 
D)  Does not support the tolerable misstatement for some or all of management's assertions.

Question 13

In which of the following circumstances would the audit team most likely use attributes sampling?

Accepted Answer

A)  Selecting customer accounts receivable for confirmation. 
B)  Selecting inventory items for verification of physical quantities. 
C)  Selecting purchase orders for indication of proper authorization. 
D)  Selecting additions to property, plant, and equipment during the year. 
A)  Selecting customer accounts receivable for confirmation. 
B)  Selecting inventory items for verification of physical quantities. 
C)  Selecting purchase orders for indication of proper authorization. 
D)  Selecting additions to property, plant, and equipment during the year.

Question 14

Lower levels of control risk are typically associated with lower levels of the risk of overreliance.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following steps in attributes sampling is most closely related to identifying key controls corresponding to the relevant management assertions?

Accepted Answer

A)  Determine the objective of sampling. 
B)  Define the deviation condition. 
C)  Define the population. 
D)  Determine the sample size. 
A)  Determine the objective of sampling. 
B)  Define the deviation condition. 
C)  Define the population. 
D)  Determine the sample size.

Question 16

Judgments about the frequency of control deviations that identify a particular control risk level are related to

Accepted Answer

A)  Sample rate of deviation. 
B)  Tolerable rate of deviation. 
C)  Upper limit rate of deviations. 
D)  Expected population deviation rate. 
A)  Sample rate of deviation. 
B)  Tolerable rate of deviation. 
C)  Upper limit rate of deviations. 
D)  Expected population deviation rate.

Question 17

Which of the following sampling risks is associated with the use of attributes sampling?

Accepted Answer

A)  Risk of underreliance, yes; risk of incorrect rejection, yes. 
B)  Risk of underreliance, yes; risk of incorrect rejection, no. 
C)  Risk of underreliance, no; risk of incorrect rejection, yes. 
D)  Risk of underreliance, no; risk of incorrect rejection, no. 
A)  Risk of underreliance, yes; risk of incorrect rejection, yes. 
B)  Risk of underreliance, yes; risk of incorrect rejection, no. 
C)  Risk of underreliance, no; risk of incorrect rejection, yes. 
D)  Risk of underreliance, no; risk of incorrect rejection, no.

Question 18

Why is the auditor more concerned with the risk of overreliance rather than the risk of underreliance?

Accepted Answer

A)  The risk of underreliance is not a type of sampling risk. 
B)  The risk of overreliance exposes the auditor to an efficiency loss. 
C)  The risk of overreliance may result in the auditor's failing to perform sufficient substantive procedures. 
D)  The risk of overreliance cannot be controlled by the auditor during the sampling process. 
A)  The risk of underreliance is not a type of sampling risk. 
B)  The risk of overreliance exposes the auditor to an efficiency loss. 
C)  The risk of overreliance may result in the auditor's failing to perform sufficient substantive procedures. 
D)  The risk of overreliance cannot be controlled by the auditor during the sampling process.

Question 19

If the upper limit rate of deviation exceeds the tolerable rate of deviation,the auditor may decide to increase the assessment of control risk.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is not true with regard to the relationship among control risk,the risk of overreliance,and the tolerable rate of deviation?

Accepted Answer

A)  Lower levels of control risk result in a higher level of the risk of overreliance. 
B)  Lower levels of the risk of overreliance result in lower tolerable rate of deviations. 
C)  Lower levels of control risk result in lower tolerable rate of deviations. 
D)  All of the above are true. 
A)  Lower levels of control risk result in a higher level of the risk of overreliance. 
B)  Lower levels of the risk of overreliance result in lower tolerable rate of deviations. 
C)  Lower levels of control risk result in lower tolerable rate of deviations. 
D)  All of the above are true.

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

A sampling plan for nonstatistical sampling is the same as statistical sampling except for which of the following steps?

__________________________ sampling is a form of attributes sampling that is used when deviations from controls are very critical yet are expected to occur at a relatively low rate.

A(n)_____________________ is an instance in which controls are not functioning as intended.

A type of sampling application in which a relatively small initial sample is examined and decisions regarding expanding that sample are based on the results of this initial sample is known as

The sample size for a test of controls varies inversely with

Attributes sampling is most closely associated with the auditor's substantive procedures.

To statistically evaluate an attributes sampling application,the auditor would not need to know

Why is the audit team more concerned with controlling the exposure to the risk of overreliance than with the risk of underreliance?

The likelihood of assessing control risk too high is the risk that the sample selected to test controls

In which of the following circumstances would the audit team most likely use attributes sampling?

Lower levels of control risk are typically associated with lower levels of the risk of overreliance.

Which of the following steps in attributes sampling is most closely related to identifying key controls corresponding to the relevant management assertions?

Judgments about the frequency of control deviations that identify a particular control risk level are related to

Which of the following sampling risks is associated with the use of attributes sampling?

Why is the auditor more concerned with the risk of overreliance rather than the risk of underreliance?

If the upper limit rate of deviation exceeds the tolerable rate of deviation,the auditor may decide to increase the assessment of control risk.

Which of the following is not true with regard to the relationship among control risk,the risk of overreliance,and the tolerable rate of deviation?

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

Variables Sampling

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Exam 18: Attributes Sampling

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

A sampling plan for nonstatistical sampling is the same as statistical sampling except for which of the following steps?

__________________________ sampling is a form of attributes sampling that is used when deviations from controls are very critical yet are expected to occur at a relatively low rate.

A(n)_____________________ is an instance in which controls are not functioning as intended.

A type of sampling application in which a relatively small initial sample is examined and decisions regarding expanding that sample are based on the results of this initial sample is known as

The sample size for a test of controls varies inversely with

Attributes sampling is most closely associated with the auditor's substantive procedures.

To statistically evaluate an attributes sampling application,the auditor would not need to know

Why is the audit team more concerned with controlling the exposure to the risk of overreliance than with the risk of underreliance?

The likelihood of assessing control risk too high is the risk that the sample selected to test controls

In which of the following circumstances would the audit team most likely use attributes sampling?

Lower levels of control risk are typically associated with lower levels of the risk of overreliance.

Which of the following steps in attributes sampling is most closely related to identifying key controls corresponding to the relevant management assertions?

Judgments about the frequency of control deviations that identify a particular control risk level are related to

Which of the following sampling risks is associated with the use of attributes sampling?

Why is the auditor more concerned with the risk of overreliance rather than the risk of underreliance?

If the upper limit rate of deviation exceeds the tolerable rate of deviation,the auditor may decide to increase the assessment of control risk.

Which of the following is not true with regard to the relationship among control risk,the risk of overreliance,and the tolerable rate of deviation?

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

Variables Sampling

Auditing in a Computerized Environment

Filters