Exam 19: Variables Sampling

Auditors are evaluating an account with a recorded balance of $500,000 using mean-per-unit estimation.This account is comprised of 1,000 individual components.The auditors sampled 100 items and determined a total audited value of $52,500.Using a risk of incorrect acceptance of 10 percent,the auditors determined a precision of $40,000.If the tolerable misstatement is $50,000,which of the following is not true?

Which of the following does not represent a difference between the use of various approaches to classical variables sampling?

When the ___ exceeds the___,the audit team is exposed to the risk of incorrect acceptance

You are planning to use monetary unit sampling to evaluate accounts receivable for Rose Company.The accounts receivable account totals $4,000,000.You have assessed a risk of incorrect acceptance of 10 percent,a tolerable misstatement of $200,000,and an expected misstatement of $40,000. a.Calculate the sample size and sampling interval. b.Regardless of your answer to (a),use a sample size of 66 and the related sampling interval to calculate the upper limit on misstatements assuming you found the following differences. Account Recorded \ Aldited Difference Balance Value 201 \ 1,000 \ 20 \ 200 532 2,000 600 1,400

Which of the following is not considered in establishing the sample size in a monetary unit sampling application?

Which of the following would not be estimated using variables sampling?

The risk of incorrect acceptance relates to the:

Which of the following is considered to be an advantage of monetary unit sampling compared to classical variables sampling? Selection of larger Abity to identijy components understatements A. Yes No B. No No C. No Yes D. Yes Yes

Solo,CPA,performed a nonstatistical sampling plan to examine the inventory balances of Hope,Inc.and estimated the account balance by projecting the misstatement based on the number of items examined.In selecting her sample of 70 items,she used an expected misstatement of $40,000 and a tolerable misstatement of $65,000.The account balance consisted of 1,050 items totaling $1,200,000.The sample recorded balance was $80,000,and the audited value was $76,000.What conclusion did Solo draw regarding the account balance?

When conducting variables sampling,auditors typically examine

Which of the following statements is true regarding performance materiality in a monetary unit sampling application?

What is the projected misstatement?

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

Allister is auditing a client's accounts balance recorded at $500,000 using monetary unit sampling and determined a sample size of 100 items.The following two misstatements were identified as a result of the substantive tests: Recorded Balaree Audited Arrount \ 4,000 \ 1,000 \ 2,000 \ 1,500 Confidence factors for a 5 percent risk of incorrect acceptance are shown below: Gverstatemert Factor ETcrs 0 3.00 1 4.75 2 6.30 What is the incremental allowance for sampling risk?

Indicate how each of the following considerations would impact sample size in a classical variables sampling application by using I (increase),D (decrease),or N (no effect). 1____.The inventory account balance several unusually large items.Carson had decided to stratify the inventory account balance so that the unusually large items are selected. 2____.Carson assigned a higher level of the risk of incorrect rejection initially because he can quickly and inexpensively select additional items for examination if needed. 3____.Carson increased the expected misstatement due to the change in Furniture Expert's method of processing and recording transactions. 4____.Carson conducted a small pilot sample to assess the population's standard deviation.The results indicated that the population was highly variable. 5____.The risk of incorrect acceptance has been decreased because the results of Carson's attributes sampling related to inventory transactions indicated control risk should be increased. 6____.During the audit,Carson realized his initial determination of the population size only included the first 11 months of year.When he corrected the population to include all 12 months the recorded inventory account balance increased by $100,000 and 55 items.

The audit team is using monetary unit sampling to examine an entity's accounts receivable balance,which is recorded at $500,000.The team has determined the tolerable misstatement to be $25,000,the risk of incorrect acceptance to be 5 percent,and the expected misstatement to be 2 percent.Using the monetary unit sampling Sample Size table,what is the appropriate sample size?

A number of factors influence the sample size for a variables sampling application.All other factors held constant,which of the following would lead to a larger sample size?

Auditors are evaluating an account with a recorded balance of $600,000 using classical variables sampling.Based on an allowable risk of incorrect acceptance of 5 percent,the auditors have determined the following: -Estimated account balance = $680,000 -Precision = $20,000 -Tolerable misstatement = $50,000 Which of the following best describes the auditors' decision and rationale for that decision?

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

Indicate how each of the following conditions affect sample size in a monetary unit sampling application by using the letters I (increase),D (decrease),or N (no effect),assuming that all other factors are held constant. 1___.An increase in the expected misstatement from $5,000 to $10,000. 2___.A decrease in the population size from $1,500,000 to $1,350,000. 3___.An increase in the tolerable misstatement from $25,000 to $35,000. 4___.An increase in the risk of incorrect rejection from 5 percent to 10 percent. 5___.A decrease in the risk of incorrect acceptance from 5 percent to 1 percent.