Question 1

The use of the ratio projection is most effective when

Accepted Answer

A)  The dollar amount of the misstatement is expected to relate to the dollar amount of items tested. 
B)  A small number of differences exist in the population. 
C)  Estimating populations whose records consist of quantities but not book values. 
D)  Large understatement differences exist in the population. 
A)  The dollar amount of the misstatement is expected to relate to the dollar amount of items tested. 
B)  A small number of differences exist in the population. 
C)  Estimating populations whose records consist of quantities but not book values. 
D)  Large understatement differences exist in the population.

Question 2

If the upper limit on misstatements exceeds tolerable misstatement, the auditor is least likely to

Accepted Answer

A)  Increase sample size. 
B)  Conduct other substantive procedures. 
C)  Adjust the account balance. 
D)  Increase the risk of incorrect rejection. 
A)  Increase sample size. 
B)  Conduct other substantive procedures. 
C)  Adjust the account balance. 
D)  Increase the risk of incorrect rejection.

Question 3

When auditing accounts payable using classical variables sampling, Sue finds evidence indicating that the account may be materially misstated. What are Sue's options?

Accepted Answer

Sue can (1) increase the sample size, (2

Question 4

The risk of incorrect acceptance and the risk of overreliance relate to the

Accepted Answer

A)  Preliminary estimates of materiality levels. 
B)  Allowable risk of tolerable error. 
C)  Efficiency of the audit. 
D)  Effectiveness of the audit. 
A)  Preliminary estimates of materiality levels. 
B)  Allowable risk of tolerable error. 
C)  Efficiency of the audit. 
D)  Effectiveness of the audit.

Question 5

For monetary-unit sampling, a sampling interval of 400 means that

Accepted Answer

A)  Every 400th item in the account will be selected in the sample. 
B)  The average size of items in the account is 400. 
C)  Every 400th dollar in the account will be included in the sample. 
D)  The average misstatement in sample items is $400. 
A)  Every 400th item in the account will be selected in the sample. 
B)  The average size of items in the account is 400. 
C)  Every 400th dollar in the account will be included in the sample. 
D)  The average misstatement in sample items is $400.

Question 6

In applying classical variables sampling, an auditor attempts to

Accepted Answer

A)  Estimate a qualitative characteristic of interest. 
B)  Determine various rates of occurrence for specified attributes. 
C)  Discover at least one instance of a critical deviation. 
D)  Predict a monetary population value within a range of precision. 
A)  Estimate a qualitative characteristic of interest. 
B)  Determine various rates of occurrence for specified attributes. 
C)  Discover at least one instance of a critical deviation. 
D)  Predict a monetary population value within a range of precision.

Question 7

Classical variables sampling uses normal distribution theory to evaluate the characteristics of a population based on sample data.

Accepted Answer

A) True 
 B)False

Question 8

Match each factor of sample size to (1) its relationship to sample size (A-Direct or B-Inverse) and (2) the appropriate effect on the sample size if the factor increases (C-Increase or D-Decrease).
1. Tolerable misstatement
2. Population size
3. Desired confidence level
4. Expected misstatement

Accepted Answer

1. B, D 2.

Question 9

The purpose of audit sampling is to draw inferences about the entire population from the results of a sample.

Accepted Answer

A) True 
 B)False

Question 10

Summarize the concept behind monetary-unit sampling (MUS). How does MUS use attribute-sampling theory?

Accepted Answer

MUS uses attribute-sampling theory to es

Question 11

Which of the following sample planning factors would influence the sample size for a substantive test of details for a specific account?

Accepted Answer

A)  Expected amount of misstatement but not the measure of tolerable misstatement. 
B)  Expected amount of misstatement and the measure of tolerable misstatement. 
C)  Measure of tolerable misstatement but not the expected amount of misstatement. 
D)  Neither the expected amount of misstatement nor the measure of tolerable misstatement. 
A)  Expected amount of misstatement but not the measure of tolerable misstatement. 
B)  Expected amount of misstatement and the measure of tolerable misstatement. 
C)  Measure of tolerable misstatement but not the expected amount of misstatement. 
D)  Neither the expected amount of misstatement nor the measure of tolerable misstatement.

Question 12

Which of the following most likely would be an advantage in using classical variables sampling rather than monetary-unit sampling?

Accepted Answer

A)  An estimate of the standard deviation of the population's recorded amounts is not required. 
B)  The auditor rarely needs the assistance of a computer program to design an efficient sample. 
C)  Inclusion of zero and negative balances generally does not require special design considerations. 
D)  Any amount that is individually significant is automatically identified and selected. 
A)  An estimate of the standard deviation of the population's recorded amounts is not required. 
B)  The auditor rarely needs the assistance of a computer program to design an efficient sample. 
C)  Inclusion of zero and negative balances generally does not require special design considerations. 
D)  Any amount that is individually significant is automatically identified and selected.

Question 13

Which one of the following statements is true regarding two random samples, drawn in the same way, from the same population, one of size 30 and one of size 300?

Accepted Answer

A)  The two samples are expected to have the same sample mean. 
B)  The larger sample is more likely to produce a large sample mean. 
C)  The smaller sample will have a smaller 95% confidence interval for the mean. 
D)  The smaller sample will, on average, produce a lower estimate of the variance of the population. 
A)  The two samples are expected to have the same sample mean. 
B)  The larger sample is more likely to produce a large sample mean. 
C)  The smaller sample will have a smaller 95% confidence interval for the mean. 
D)  The smaller sample will, on average, produce a lower estimate of the variance of the population.

Question 14

In a monetary-unit sample with a sampling interval of $5,000, an auditor discovers that a selected account receivable with a recorded amount of $10,000 has an audit amount of $8,000. If this were the only error discovered by the auditor, the projected misstatement for this sample would be

Accepted Answer

A)  $5,000. 
B)  $4,000. 
C)  $2,000. 
D)  $1,000.
Since the item sampled is greater than the sampling interval, the factual error of $2,000 is equal to the projected error. 
A)  $5,000. 
B)  $4,000. 
C)  $2,000. 
D)  $1,000.
Since the item sampled is greater than the sampling interval, the factual error of $2,000 is equal to the projected error.

The use of the ratio projection is most effective when

If the upper limit on misstatements exceeds tolerable misstatement, the auditor is least likely to

When auditing accounts payable using classical variables sampling, Sue finds evidence indicating that the account may be materially misstated. What are Sue's options?

The risk of incorrect acceptance and the risk of overreliance relate to the

For monetary-unit sampling, a sampling interval of 400 means that

In applying classical variables sampling, an auditor attempts to

Classical variables sampling uses normal distribution theory to evaluate the characteristics of a population based on sample data.

Match each factor of sample size to (1) its relationship to sample size (A-Direct or B-Inverse) and (2) the appropriate effect on the sample size if the factor increases (C-Increase or D-Decrease). 1. Tolerable misstatement 2. Population size 3. Desired confidence level 4. Expected misstatement

The purpose of audit sampling is to draw inferences about the entire population from the results of a sample.

Summarize the concept behind monetary-unit sampling (MUS). How does MUS use attribute-sampling theory?

Which of the following sample planning factors would influence the sample size for a substantive test of details for a specific account?

Which of the following most likely would be an advantage in using classical variables sampling rather than monetary-unit sampling?

Which one of the following statements is true regarding two random samples, drawn in the same way, from the same population, one of size 30 and one of size 300?

In a monetary-unit sample with a sampling interval of $5,000, an auditor discovers that a selected account receivable with a recorded amount of $10,000 has an audit amount of $8,000. If this were the only error discovered by the auditor, the projected misstatement for this sample would be

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Auditing the Inventory Management Process

Auditing the Financing Investing Process: Prepaid Expenses Intangible Assets and Property Plant and Equipment

Auditing the Financing Investing Process: Long-Term Liabilities Stockholders Equity and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct, Independence, and Quality Control

Legal Liability

Assurance, Attestation, and Internal Auditing Services

Filters

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

The use of the ratio projection is most effective when

If the upper limit on misstatements exceeds tolerable misstatement, the auditor is least likely to

When auditing accounts payable using classical variables sampling, Sue finds evidence indicating that the account may be materially misstated. What are Sue's options?

The risk of incorrect acceptance and the risk of overreliance relate to the

For monetary-unit sampling, a sampling interval of 400 means that

In applying classical variables sampling, an auditor attempts to

Classical variables sampling uses normal distribution theory to evaluate the characteristics of a population based on sample data.

Match each factor of sample size to (1) its relationship to sample size (A-Direct or B-Inverse) and (2) the appropriate effect on the sample size if the factor increases (C-Increase or D-Decrease). 1. Tolerable misstatement 2. Population size 3. Desired confidence level 4. Expected misstatement

The purpose of audit sampling is to draw inferences about the entire population from the results of a sample.

Summarize the concept behind monetary-unit sampling (MUS). How does MUS use attribute-sampling theory?

Which of the following sample planning factors would influence the sample size for a substantive test of details for a specific account?

Which of the following most likely would be an advantage in using classical variables sampling rather than monetary-unit sampling?

Which one of the following statements is true regarding two random samples, drawn in the same way, from the same population, one of size 30 and one of size 300?

In a monetary-unit sample with a sampling interval of $5,000, an auditor discovers that a selected account receivable with a recorded amount of $10,000 has an audit amount of $8,000. If this were the only error discovered by the auditor, the projected misstatement for this sample would be

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Auditing the Inventory Management Process

Auditing the Financing Investing Process: Prepaid Expenses Intangible Assets and Property Plant and Equipment

Auditing the Financing Investing Process: Long-Term Liabilities Stockholders Equity and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct, Independence, and Quality Control

Legal Liability

Assurance, Attestation, and Internal Auditing Services

Filters