Exam 17: Overview of Sampling

While performing an audit of accounts receivable,Allen,CPA,found that the sample results supported the conclusion that the accounts receivable balance was materially misstated.However,the balance was,in fact,not materially misstated.This situation illustrates the risk of:

Why is appropriately defining the population so important in a sampling application?

Indicate the type of sampling risk involved in each of the following situations.Use the following in your answer: A.Risk of under reliance B.Risk of over reliance C.Risk of incorrect acceptance D.Risk of incorrect rejection N.No risk 1___.An auditor determined the adjusted sample rate of deviation to be higher than the tolerable rate of deviation.However,the rate of deviation in the population is less than the tolerable rate of deviation.2___.While examining accounts payable,the sample results supported the auditor's conclusion that the accounts payable balance was correctly stated.However,the balance was materially misstated.3___.An audit team used attributes sampling to evaluate a client's internal control policies regarding the physical security of inventory and determined they would need to reduce their planned reliance on internal controls.This decision is consistent with the results of evaluating the entire population.4___.An auditor concluded that the upper limit on misstatement was less than the tolerable misstatement,but in reality the actual misstatement was greater than the tolerable misstatement.5___.While performing an evaluation of internal controls,an auditor determined that internal controls were operating effectively.However,if the entire population had been evaluated,the auditor would have increased control risk.6___.An auditor concluded that the inventory account balance was materially misstated based on the results of variables sampling.However,the balance was not materially misstated.

Jones,CPA,is performing a sampling application to determine the average number of patrons attending the performance of a musical on a weeknight.She randomly selects five weeknight performances during the month of May and calculates an average of 230 patrons per performance,with an associated precision of 25 patrons.This precision is determined based on a confidence level of 95 percent. A.What is Jones' exposure to sampling risk? B.What is the precision interval associated with Jones' sample? C.Provide an explanation of the sampling interval calculated in (b)above. D.If theaters needed an average attendance of 200 patrons per weeknight to remain profitable,what would Jones' conclusion be with respect to this question?

After the auditor has defined the population to be examined,the next step would be to:

Below are statements or examples related to audit sampling applications.Indicate,using the correct letter,which concept is most closely associated with the statement or example.Each concept may be related to more than one statement or example. A.Statistical sampling. B.Nonstatistical sampling. C.Sampling risk. D.Nonsampling risk.1___.Jones,CPA,selected a sample and evaluated the results of her sample using the laws of probability.2___.Wilson,CPA,checked to see if any signature was in the credit approval box on a sample of sales orders rather than looking for only authorized signatures.3___.Based on a statistical sample,Jackson,CPA,concluded the client's control was functioning effectively when the deviation rate in the population was actually unacceptable.4___.Barnum,CPA,selected all invoices over $1,000 and all invoices recorded on the 15th of each month for his sample.5___.When a client could not produce an invoice for a sample selected by the auditor,the auditor accepted the client's assurance that the invoice contained the appropriate approval.

When the auditor concludes that the account balance is not materially misstated when,in fact,it is materially misstated,the auditor has committed the:

An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps an auditor to:

In performing variables sampling,the auditor will conclude that the account balance is not materially misstated if the ____ is less than or equal to ____.

Below are examples of procedures performed in a sampling plan to estimate the average height of a student-athlete.Indicate,using the correct letter,which step in the sampling process is most closely associated with the example.Each step is associated with only one example. A.Determine the objective of sampling. B.Define the population. C.Measure the sample items. D.Evaluate the sample results.1___.Identify the sport(s)from which you wish to select student-athletes.2___.Compare the height of the student-athletes against a predetermined comparator group.3___.Hypothesize the expected relationship between the height of student-athletes and a predetermined comparator group.4___.Using a tape measure or other system,determine the height of the sample of student-athletes.

Select the description that best illustrates sampling risk.

The method of sample selection in which a random starting point is selected and a fixed number of items are bypassed prior to the next item being selected is referred to as:

All of the following are advantages of statistical sampling except:

Which of the following is not true with respect to the risk of incorrect acceptance?

Auditors use attributes sampling in assessing the effectiveness of a client's internal controls to determine: