Question 1

An audit team would be most likely to use attributes sampling in which of the following situations?

Accepted Answer

A) Performing analytical procedures during the planning stages of the audit. 
B) Evaluating management's integrity during the client acceptance process. 
C) Determining the effectiveness of the audit committee in evaluating the entity's control environment. 
D) Examining purchase requisitions for proper authorization. 
A) Performing analytical procedures during the planning stages of the audit. 
B) Evaluating management's integrity during the client acceptance process. 
C) Determining the effectiveness of the audit committee in evaluating the entity's control environment. 
D) Examining purchase requisitions for proper authorization.

Question 2

An auditor who uses statistical sampling for attributes in testing internal controls should reduce the planned reliance on a prescribed control when the:

Accepted Answer

A) Sample rate of deviation plus the allowance for sampling risk equals the tolerable rate of deviation. 
B) Sample rate of deviation is less than the expected rate of deviation used in planning the sample. 
C) Tolerable rate less the allowance for sampling risk exceeds the sample rate of deviation. 
D) Sample rate of deviation plus the allowance for sampling risk exceeds the tolerable rate of deviation. 
A) Sample rate of deviation plus the allowance for sampling risk equals the tolerable rate of deviation. 
B) Sample rate of deviation is less than the expected rate of deviation used in planning the sample. 
C) Tolerable rate less the allowance for sampling risk exceeds the sample rate of deviation. 
D) Sample rate of deviation plus the allowance for sampling risk exceeds the tolerable rate of deviation.

Question 3

An auditor's determination of a lower level of control risk would most likely be associated with

Accepted Answer

A) Larger population sizes for tests of controls. 
B) Larger samples for substantive procedures. 
C) Smaller samples for substantive procedures. 
D) Lower levels of detection risk. 
A) Larger population sizes for tests of controls. 
B) Larger samples for substantive procedures. 
C) Smaller samples for substantive procedures. 
D) Lower levels of detection risk.

Question 4

Indicate how each of the following conditions affect sample size by using the letters I (increase),D (decrease),or N (no effect).For each condition,hold all other factors constant.
1____.An increase in the expected population deviation rate from 2% to 5%.
2____.A decrease in the population from 10,000 controls to 5,000 controls.
3____.An increase in the tolerable rate of deviation from 3% to 10%.
4____.An increase in the risk of underreliance from 5% to 10%.
5____.A decrease in the risk of overreliance from 5% to 1%.

Accepted Answer

1.I; 2.N;

Question 5

While selecting a sample of sales invoices for a test of internal controls,the auditor was unable to locate one invoice and classified this invoice as non-deviation.This is an example of

Accepted Answer

A) Sampling risk. 
B) Incorrect acceptance. 
C) Nonsampling risk. 
D) Deviation risk. 
A) Sampling risk. 
B) Incorrect acceptance. 
C) Nonsampling risk. 
D) Deviation risk.

Question 6

Which of the following statements is correct concerning statistical sampling in tests of controls?

Accepted Answer

A) As the population increases,the sample size should increase proportionally. 
B) The expected population deviation rate can either be based on prior audits or a small sample of controls examined in the current year. 
C) There is an inverse relationship between the expected population deviation rate and sample size. 
D) In determining the tolerable rate of deviation,an auditor considers the desired level of detection risk. 
A) As the population increases,the sample size should increase proportionally. 
B) The expected population deviation rate can either be based on prior audits or a small sample of controls examined in the current year. 
C) There is an inverse relationship between the expected population deviation rate and sample size. 
D) In determining the tolerable rate of deviation,an auditor considers the desired level of detection risk.

Question 7

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 a lower tolerable rate of deviation. 
C) Lower levels of control risk result in a lower tolerable rate of deviation. 
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 a lower tolerable rate of deviation. 
C) Lower levels of control risk result in a lower tolerable rate of deviation. 
D) All of the above are true.

Question 8

If the audit team established a tolerable rate of deviation of 3%,an expected population deviation rate of 2%,and desired to control the risk of overreliance to 5%,what sample size would be appropriate in this situation?

Accepted Answer

A) 390 items. 
B) 568 items. 
C) 590 items. 
D) 846 items. 
A) 390 items. 
B) 568 items. 
C) 590 items. 
D) 846 items.

Question 9

An auditor is testing control procedures that are evidenced on an entity's vouchers by matching random numbers with voucher numbers.If a random number matches the number of a voided voucher,that voucher ordinarily should be replaced by another voucher in the random sample if the voucher:

Accepted Answer

A) Constitutes a deviation. 
B) Has been properly voided. 
C) Cannot be located. 
D) Represents an immaterial dollar amount. 
A) Constitutes a deviation. 
B) Has been properly voided. 
C) Cannot be located. 
D) Represents an immaterial dollar amount.

Question 10

Assume that the audit team wishes to determine the extent to which a particular control policy was functioning as intended.Identifying applications of the control throughout the period under audit would be most closely related to which of the following steps in sampling?

Accepted Answer

A) Determining the objective of sampling. 
B) Defining the characteristic of interest. 
C) Defining the population. 
D) Determining the sample size. 
A) Determining the objective of sampling. 
B) Defining the characteristic of interest. 
C) Defining the population. 
D) Determining the sample size.

Question 11

In determining the number of documents to select for a test to obtain assurance that all sales returns have been properly authorized,an auditor should consider the tolerable rate of deviation from the control activity.The auditor should also consider: 1.Likely rate of deviations
2)Allowable risk of underreliance.

Accepted Answer

A) 1 only. 
B) 2 only. 
C) Both 1 and 2. 
D) Either 1 or 2. 
A) 1 only. 
B) 2 only. 
C) Both 1 and 2. 
D) Either 1 or 2.

Question 12

Why does the risk of overreliance have an inverse relationship with sample size?

Accepted Answer

A) As the audit team expects fewer deviations from the control policy or procedure,the audit team can appropriately examine fewer items. 
B) As the audit team is less concerned with making an incorrect conclusion with respect to reliance on the client's internal control,the audit team can appropriately examine fewer items. 
C) As the level of control risk increases,the audit team is placing less reliance on internal control and can appropriately examine fewer items. 
D) As the audit team requires greater compliance with the control policy or procedure,the audit team must examine a greater number of items. 
A) As the audit team expects fewer deviations from the control policy or procedure,the audit team can appropriately examine fewer items. 
B) As the audit team is less concerned with making an incorrect conclusion with respect to reliance on the client's internal control,the audit team can appropriately examine fewer items. 
C) As the level of control risk increases,the audit team is placing less reliance on internal control and can appropriately examine fewer items. 
D) As the audit team requires greater compliance with the control policy or procedure,the audit team must examine a greater number of items.

Question 13

As a result of sampling procedures applied as tests of controls,an auditor incorrectly assesses control risk lower than appropriate.The most likely explanation for this situation is that:

Accepted Answer

A) The deviation rates of both the auditor's sample and the population exceed the tolerable rate of deviation. 
B) The deviation rates of both the auditor's sample and the population are less than the tolerable rate of deviation. 
C) The deviation rate in the auditor's sample is less than the tolerable rate of deviation,but the deviation rate in the population exceeds the tolerable rate of deviation. 
D) The deviation rate in the auditor's sample exceeds the tolerable rate of deviation,but the deviation rate in the population is less than the tolerable rate of deviation. 
A) The deviation rates of both the auditor's sample and the population exceed the tolerable rate of deviation. 
B) The deviation rates of both the auditor's sample and the population are less than the tolerable rate of deviation. 
C) The deviation rate in the auditor's sample is less than the tolerable rate of deviation,but the deviation rate in the population exceeds the tolerable rate of deviation. 
D) The deviation rate in the auditor's sample exceeds the tolerable rate of deviation,but the deviation rate in the population is less than the tolerable rate of deviation.

Question 14

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 15

If an auditor calculated an upper limit rate of deviation of 5% when the tolerable rate of deviation was 4%,the auditor would conclude that:

Accepted Answer

A) The population deviation rate is low enough to rely on internal control as planned. 
B) The population deviation rate may be higher than that necessary to rely on internal control as planned. 
C) The control risk can be assessed at planned levels. 
D) The control risk should be assessed at lower levels. 
A) The population deviation rate is low enough to rely on internal control as planned. 
B) The population deviation rate may be higher than that necessary to rely on internal control as planned. 
C) The control risk can be assessed at planned levels. 
D) The control risk should be assessed at lower levels.

Question 16

If the upper limit rate of deviation exceeds the tolerable rate of deviation,the auditor would most likely:

Accepted Answer

A) Accept the account balance as fairly stated. 
B) Reject the account balance as fairly stated. 
C) Increase the planned effectiveness of substantive procedures. 
D) Not increase the planned effectiveness of substantive procedures. 
A) Accept the account balance as fairly stated. 
B) Reject the account balance as fairly stated. 
C) Increase the planned effectiveness of substantive procedures. 
D) Not increase the planned effectiveness of substantive procedures.

Question 17

Indicate how each of the following conditions affect sample size by using the letters I (increase),D (decrease),or N (no effect).For each condition,hold all other factors constant.
1____.Holmes is expecting more deviations in the population from prior years because the client has recently implemented a new transaction processing system.
2____.Holmes has been criticized for going over budget in the past so he has decreased the risk of underreliance from 15% to 5%.
3____.At the beginning of the period,the client hired a new accounting manager to oversee the implementation of policies and procedures relating to accurate and complete financial reporting.Holmes believes the new manager has helped decrease employee errors.
4____.Holmes has decided that the tolerable rate of deviation was set too low initially and should be increased slightly to better reflect the planned level of control risk.
5____.Holmes defined the population as all sales invoices found in the client's computerized listing.However,the first list he received did not include sales made during the last two weeks of the period.When an updated list was provided the population (which was already large)increased by 5%.
6____.The risk of overreliance has been decreased because Holmes wants to place more reliance on the controls being tested.
7____.Due to a change in firm policy,the tolerable rate of deviation has been decreased.

Accepted Answer

1.I; 2.N;

Question 18

The auditor tested a sample of recorded sales invoices for evidence of credit approval.Based on the results of the sample,the auditor concluded that there was a satisfactory rate of approvals.Unknown to the auditor,credit approvals in the population were not satisfactory.This would be an example of:

Accepted Answer

A) Risk of overreliance. 
B) Risk of underreliance. 
C) Risk of incorrect acceptance. 
D) Risk of incorrect rejection. 
A) Risk of overreliance. 
B) Risk of underreliance. 
C) Risk of incorrect acceptance. 
D) Risk of incorrect rejection.

Question 19

To ensure proper authorization of payroll functions, Walters selected all transactions during the last 5 days of each pay period to be included in the sample.

Accepted Answer

A) unrestricted random (UR) 
B) systematic random (SR) 
C) haphazard (H) 
D) block (
B)  
A) unrestricted random (UR) 
B) systematic random (SR) 
C) haphazard (H) 
D) block (
B)

Question 20

When the auditor concludes that a control is functioning properly when,in fact,it is not,the auditor has committed the:

Accepted Answer

A) Risk of underreliance. 
B) Risk of overreliance. 
C) Risk of incorrect acceptance. 
D) Risk of incorrect rejection. 
A) Risk of underreliance. 
B) Risk of overreliance. 
C) Risk of incorrect acceptance. 
D) Risk of incorrect rejection.

An audit team would be most likely to use attributes sampling in which of the following situations?

An auditor who uses statistical sampling for attributes in testing internal controls should reduce the planned reliance on a prescribed control when the:

An auditor's determination of a lower level of control risk would most likely be associated with

While selecting a sample of sales invoices for a test of internal controls,the auditor was unable to locate one invoice and classified this invoice as non-deviation.This is an example of

Which of the following statements is correct concerning statistical sampling in tests of controls?

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?

If the audit team established a tolerable rate of deviation of 3%,an expected population deviation rate of 2%,and desired to control the risk of overreliance to 5%,what sample size would be appropriate in this situation?

An auditor is testing control procedures that are evidenced on an entity's vouchers by matching random numbers with voucher numbers.If a random number matches the number of a voided voucher,that voucher ordinarily should be replaced by another voucher in the random sample if the voucher:

Assume that the audit team wishes to determine the extent to which a particular control policy was functioning as intended.Identifying applications of the control throughout the period under audit would be most closely related to which of the following steps in sampling?

Why does the risk of overreliance have an inverse relationship with sample size?

As a result of sampling procedures applied as tests of controls,an auditor incorrectly assesses control risk lower than appropriate.The most likely explanation for this situation is that:

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

If an auditor calculated an upper limit rate of deviation of 5% when the tolerable rate of deviation was 4%,the auditor would conclude that:

If the upper limit rate of deviation exceeds the tolerable rate of deviation,the auditor would most likely:

The auditor tested a sample of recorded sales invoices for evidence of credit approval.Based on the results of the sample,the auditor concluded that there was a satisfactory rate of approvals.Unknown to the auditor,credit approvals in the population were not satisfactory.This would be an example of:

To ensure proper authorization of payroll functions, Walters selected all transactions during the last 5 days of each pay period to be included in the sample.

When the auditor concludes that a control is functioning properly when,in fact,it is not,the auditor has committed the:

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

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Internal Audits, Governmental Audits, and Fraud Examinations

Overview of Sampling

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Exam 18: Attributes Sampling

An audit team would be most likely to use attributes sampling in which of the following situations?

An auditor who uses statistical sampling for attributes in testing internal controls should reduce the planned reliance on a prescribed control when the:

An auditor's determination of a lower level of control risk would most likely be associated with

While selecting a sample of sales invoices for a test of internal controls,the auditor was unable to locate one invoice and classified this invoice as non-deviation.This is an example of

Which of the following statements is correct concerning statistical sampling in tests of controls?

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?

If the audit team established a tolerable rate of deviation of 3%,an expected population deviation rate of 2%,and desired to control the risk of overreliance to 5%,what sample size would be appropriate in this situation?

An auditor is testing control procedures that are evidenced on an entity's vouchers by matching random numbers with voucher numbers.If a random number matches the number of a voided voucher,that voucher ordinarily should be replaced by another voucher in the random sample if the voucher:

Assume that the audit team wishes to determine the extent to which a particular control policy was functioning as intended.Identifying applications of the control throughout the period under audit would be most closely related to which of the following steps in sampling?

Why does the risk of overreliance have an inverse relationship with sample size?

As a result of sampling procedures applied as tests of controls,an auditor incorrectly assesses control risk lower than appropriate.The most likely explanation for this situation is that:

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

If an auditor calculated an upper limit rate of deviation of 5% when the tolerable rate of deviation was 4%,the auditor would conclude that:

If the upper limit rate of deviation exceeds the tolerable rate of deviation,the auditor would most likely:

To ensure proper authorization of payroll functions, Walters selected all transactions during the last 5 days of each pay period to be included in the sample.

When the auditor concludes that a control is functioning properly when,in fact,it is not,the auditor has committed the:

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 Audits, Governmental Audits, and Fraud Examinations

Overview of Sampling

Variables Sampling

Auditing and Information Technology

Filters