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

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

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

The formula for nonstatistical sampling for tests of account balances provided by the AICPA

Describe two advantages and two disadvantages of monetary-use sampling (MUS).

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?

The size of the upper limit on misstatement is largely dependent on the sample size,which is inversely related to the desired confidence level.

The assurance factor for nonstatistical sampling is based on

An accounts receivable account balance is $500,000 and the auditor determines a sample size of 30 would provide adequate assurance.The auditor plans to use a monetary-unit sampling plan with systematic sample selection.The auditor notices that there are six customer accounts of at least $15,000 and would like the systematic selection technique to select all items that are at least $15,000,even if that means the sample size is slightly larger than 30.To achieve the auditor's objectives,the sampling interval should be

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

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?

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

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

An auditor established a $60,000 tolerable misstatement for an account balance of $1,000,000.The auditor selected a sample of every twentieth item from the population of 1,000 items that represented the asset account balance and discovered overstatements of $3,700 and understatements of $200.Under these circumstances,the auditor most likely would conclude that

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

What is one advantage and one disadvantage of classical variables sampling?

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