Exam 9: Audit Sampling: An Application to Substantive Tests of Account Balances

A number of factors influence the sample size for a substantive test of details of an account balance. All other factors being equal, which of the following would lead to a larger sample size?

Matching

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. It was, in fact, not materially misstated. Such a situation illustrates the risk of

An auditor has taken a large sample from an audit population that is skewed in the sense that it contains a large number of small dollar balances. The auditor can conclude

Monetary-unit sampling is said to eliminate the need to stratify the sample because

What is the primary objective of testing all individually significant items rather than sample testing?

Whenever a statistical method is used, a decision rule determines whether the population is acceptable. The decision rule for monetary-unit sampling is "Accept the conclusion that the book value is not misstated by a material amount if ________________________."

The objective of monetary-unit sampling is to test the assertion that no material misstatements exist in an account balance or class of transactions.

Precision is a statistical measure of the maximum projected difference between the sample estimate and the true but unknown population total and is directly related to

Which of the following statements best describes an inherent limitation of the monetary-unit sampling method?

After a sample is drawn randomly, the allowance for sampling risk must be statistically quantified within a specified level of confidence.

In nonstatistical sampling, describe the two methods auditors use to project sample results to the population. How does an auditor determine which method to use?

In examining cash disbursements, an auditor plans to choose a sample using systematic selection with a random start. The primary advantage of such a systematic selection is that population items

An auditor is performing substantive procedures of pricing and extension of perpetual inventory balances consisting of a large number of items. Past experience indicates numerous pricing and extension errors. Which of the following statistical sampling approaches is most appropriate?

Monetary-unit sampling should not be used if

Which of the following sampling methods would be used to estimate a numerical measurement of population, such as the dollar value of an account?

In statistical sampling, setting the appropriate confidence level and desired sample precision are decisions made by the auditor that will affect sample size for a substantive procedure. Which of the following should not be a factor in the choice of desired precision?

The accounting department reports that the balance of accounts receivable is $210,000. You are willing to accept that balance if audit sampling suggests it is within $15,000 of the actual balance. Using a classical variables sampling plan, you compute a 95% confidence interval of $208,000 to $225,000. You would therefore

For monetary-unit sampling, the number of items tested is

Haphazard selection allows the auditor to select items judgmentally.