Question 1

Harvey Jones,CPA,uses statistical sampling to test control procedures.What is a benefit of using statistical sampling?

Accepted Answer

A)  It provides a means of mathematically measuring the sampling risk that result from examining only a part of the data. 
B)  It eliminates the use of judgment required of Jones because the AICPA has established numerical criteria for this type of testing. 
C)  It increases Jones' knowledge of the client's prescribed procedures and their limitations. 
D)  It is required by generally accepted auditing standards. 
A)  It provides a means of mathematically measuring the sampling risk that result from examining only a part of the data. 
B)  It eliminates the use of judgment required of Jones because the AICPA has established numerical criteria for this type of testing. 
C)  It increases Jones' knowledge of the client's prescribed procedures and their limitations. 
D)  It is required by generally accepted auditing standards.

Question 2

The tolerable deviation rate for a test of controls is generally

Accepted Answer

A)  Lower than the expected rate of deviations in the related accounting records. 
B)  Higher than the expected rate of deviations in the related accounting records. 
C)  Identical to the expected rate of deviations in the related accounting records. 
D)  Unrelated to the expected rate of deviations in the related accounting records. 
A)  Lower than the expected rate of deviations in the related accounting records. 
B)  Higher than the expected rate of deviations in the related accounting records. 
C)  Identical to the expected rate of deviations in the related accounting records. 
D)  Unrelated to the expected rate of deviations in the related accounting records.

Question 3

Define Type I and Type II errors.

Accepted Answer

A TYPE I ERROR IS EQUIVALENT TO INCORREC

Question 4

Auditors who prefer statistical to nonstatistical sampling believe that the principal advantage of statistical sampling flows from its unique ability to

Accepted Answer

A)  Define the precision required to provide audit satisfaction. 
B)  Mathematically measure uncertainty. 
C)  Establish conclusive audit evidence with decreased audit effort. 
D)  Promote a more legally defensible procedural approach. 
A)  Define the precision required to provide audit satisfaction. 
B)  Mathematically measure uncertainty. 
C)  Establish conclusive audit evidence with decreased audit effort. 
D)  Promote a more legally defensible procedural approach.

Question 5

Which of the following risks is related to efficiency of testing?

Accepted Answer

A)  The risk of incorrect rejection. 
B)  Inherent risk. 
C)  The risk of incorrect acceptance. 
D)  None of the above. 
A)  The risk of incorrect rejection. 
B)  Inherent risk. 
C)  The risk of incorrect acceptance. 
D)  None of the above.

Question 6

If the expected deviation rate exceeds the tolerable deviation rate,the auditor is most likely to

Accepted Answer

A)  Have a large sample size. 
B)  Set control risk at the maximum without sampling. 
C)  Set control risk at the minimum without sampling. 
D)  Pick a lower risk of assessing control risk too low to increase sample size. 
A)  Have a large sample size. 
B)  Set control risk at the maximum without sampling. 
C)  Set control risk at the minimum without sampling. 
D)  Pick a lower risk of assessing control risk too low to increase sample size.

Question 7

Attribute sampling is used to estimate the proportion of a population that possesses a specified characteristic.

Accepted Answer

A) True 
 B)False

Question 8

In nonstatistical sampling for tests of controls,increasing the desired confidence level results in a

Accepted Answer

A)  Higher tolerable deviation rate. 
B)  Lower expected deviation rate. 
C)  Larger sample size. 
D)  Smaller sample size. 
A)  Higher tolerable deviation rate. 
B)  Lower expected deviation rate. 
C)  Larger sample size. 
D)  Smaller sample size.

Question 9

Which of the following factors does an auditor generally need to consider in planning a particular audit sample for a test of controls?

Accepted Answer

A)  Number of items in the population. 
B)  Total dollar amount of the items to be sampled. 
C)  Desired confidence level. 
D)  Risk of assessing control risk too high. 
A)  Number of items in the population. 
B)  Total dollar amount of the items to be sampled. 
C)  Desired confidence level. 
D)  Risk of assessing control risk too high.

Question 10

If auditors conducting attributes sampling found that the client deviated from a prescribed control in nine of the first 10 items examined,the auditor is most likely to

Accepted Answer

A)  Increase sample size. 
B)  Increase the computed upper deviation rate. 
C)  Decrease the tolerable deviation rate. 
D)  Stop the test and increase control risk. 
A)  Increase sample size. 
B)  Increase the computed upper deviation rate. 
C)  Decrease the tolerable deviation rate. 
D)  Stop the test and increase control risk.

Question 11

If the size of the sample to be used in a particular test of controls has not been determined by utilizing statistical concepts,but the sample has been chosen in accordance with random selection procedures

Accepted Answer

A)  No inferences can be drawn from the sample. 
B)  The auditor has committed a nonsampling error. 
C)  Depending on the size of the sample chosen, the auditor may actually achieve desired precision. 
D)  The auditor will have to evaluate the results by reference to the principles of discovery sampling. 
A)  No inferences can be drawn from the sample. 
B)  The auditor has committed a nonsampling error. 
C)  Depending on the size of the sample chosen, the auditor may actually achieve desired precision. 
D)  The auditor will have to evaluate the results by reference to the principles of discovery sampling.

Question 12

Audit sampling is commonly used for which type of audit evidence?

Accepted Answer

A)  Reperformance. 
B)  Analytical procedures. 
C)  Inquiry. 
D)  Observation. 
A)  Reperformance. 
B)  Analytical procedures. 
C)  Inquiry. 
D)  Observation.

Question 13

For an attributes sampling plan,the tolerable deviation rate is 4%,the computed upper deviation rate is 7%,the sample deviation rate is 3%,and the risk of assessing control risk too low is 5%.Which of the following is true?

Accepted Answer

A)  The auditor must increase control risk because the risk of assessing control risk too low is greater than the tolerable deviation rate. 
B)  The auditor is likely to increase control risk because the risk of assessing control risk too low is greater than the tolerable deviation rate. 
C)  The auditor must increase control risk because the computed upper deviation rate is greater than the tolerable deviation rate. 
D)  The auditor is likely to increase control risk because the computed upper deviation rate is greater than the tolerable deviation rate. 
A)  The auditor must increase control risk because the risk of assessing control risk too low is greater than the tolerable deviation rate. 
B)  The auditor is likely to increase control risk because the risk of assessing control risk too low is greater than the tolerable deviation rate. 
C)  The auditor must increase control risk because the computed upper deviation rate is greater than the tolerable deviation rate. 
D)  The auditor is likely to increase control risk because the computed upper deviation rate is greater than the tolerable deviation rate.

Question 14

Which of the following statements is correct concerning statistical sampling in compliance testing?

Accepted Answer

A)  The population size has little or no effect on determining sample size except for very small populations. 
B)  The expected population deviation rate has little or no effect on determining sample size except for very small populations. 
C)  As the population size doubles, the sample size also should double. 
D)  For a given tolerable deviation rate, a larger sample size should be selected as the expected population deviation rate decreases. 
A)  The population size has little or no effect on determining sample size except for very small populations. 
B)  The expected population deviation rate has little or no effect on determining sample size except for very small populations. 
C)  As the population size doubles, the sample size also should double. 
D)  For a given tolerable deviation rate, a larger sample size should be selected as the expected population deviation rate decreases.

Question 15

As a result of tests of controls,an auditor incorrectly assessed control risk too low and decreased substantive testing.This assessment occurred because the true deviation rate in the population was

Accepted Answer

A)  More than the risk of assessing control risk too low based on the auditor's sample. 
B)  More than the deviation rate in the auditor's sample. 
C)  Less than the risk of assessing control risk too low based on the auditor's sample. 
D)  Less than the deviation rate in the auditor's sample. 
A)  More than the risk of assessing control risk too low based on the auditor's sample. 
B)  More than the deviation rate in the auditor's sample. 
C)  Less than the risk of assessing control risk too low based on the auditor's sample. 
D)  Less than the deviation rate in the auditor's sample.

Question 16

Define sampling risk and nonsampling risk.

Accepted Answer

Sampling risk refers to the possibility

Question 17

A control is deemed to be more important than thought at the time that attributes sampling parameters were set.The auditor is most likely to respond by

Accepted Answer

A)  Decreasing the risk of assessing control risk too high. 
B)  Increasing population size. 
C)  Decreasing the tolerable deviation rate. 
D)  Decreasing the expected deviation rate. 
A)  Decreasing the risk of assessing control risk too high. 
B)  Increasing population size. 
C)  Decreasing the tolerable deviation rate. 
D)  Decreasing the expected deviation rate.

Question 18

As a result of tests of controls,an auditor over relied on internal control and decreased substantive testing.This overreliance occurred because the true deviation rate in the population was

Accepted Answer

A)  Less than the risk of assessing control risk too low on the auditor's sample. 
B)  Less than the deviation rate in the auditor's sample. 
C)  More than the risk of assessing control risk too low on the auditor's sample. 
D)  More than the deviation rate in the auditor's sample. 
A)  Less than the risk of assessing control risk too low on the auditor's sample. 
B)  Less than the deviation rate in the auditor's sample. 
C)  More than the risk of assessing control risk too low on the auditor's sample. 
D)  More than the deviation rate in the auditor's sample.

Question 19

Which of the following combinations guarantees a larger sample size?

Accepted Answer

A)  Decrease the desired confidence level and decrease the tolerable deviation rate. 
B)  Increase the desired confidence level and decrease the tolerable deviation rate. 
C)  Decrease the desired confidence level and increase the expected deviation rate. 
D)  Increase the tolerable deviation rate and increase the expected deviation rate. 
A)  Decrease the desired confidence level and decrease the tolerable deviation rate. 
B)  Increase the desired confidence level and decrease the tolerable deviation rate. 
C)  Decrease the desired confidence level and increase the expected deviation rate. 
D)  Increase the tolerable deviation rate and increase the expected deviation rate.

Question 20

In which of the following cases would the auditor be most likely to conclude that all of the items in an account under consideration should be examined rather than tested on a sample basis?

Accepted Answer

A)  Tolerable deviation is large and expected deviation is low. 
B)  Tolerable deviation is small and expected deviation is high. 
C)  Tolerable deviation is large and expected deviation is high. 
D)  Tolerable deviation is small and expected deviation is low. 
A)  Tolerable deviation is large and expected deviation is low. 
B)  Tolerable deviation is small and expected deviation is high. 
C)  Tolerable deviation is large and expected deviation is high. 
D)  Tolerable deviation is small and expected deviation is low.

Exam 8: Audit Sampling: An Overview and Application to Tests of Controls

Harvey Jones,CPA,uses statistical sampling to test control procedures.What is a benefit of using statistical sampling?

The tolerable deviation rate for a test of controls is generally

Define Type I and Type II errors.

Auditors who prefer statistical to nonstatistical sampling believe that the principal advantage of statistical sampling flows from its unique ability to

Which of the following risks is related to efficiency of testing?

If the expected deviation rate exceeds the tolerable deviation rate,the auditor is most likely to

Attribute sampling is used to estimate the proportion of a population that possesses a specified characteristic.

In nonstatistical sampling for tests of controls,increasing the desired confidence level results in a

Which of the following factors does an auditor generally need to consider in planning a particular audit sample for a test of controls?

If auditors conducting attributes sampling found that the client deviated from a prescribed control in nine of the first 10 items examined,the auditor is most likely to

If the size of the sample to be used in a particular test of controls has not been determined by utilizing statistical concepts,but the sample has been chosen in accordance with random selection procedures

Audit sampling is commonly used for which type of audit evidence?

For an attributes sampling plan,the tolerable deviation rate is 4%,the computed upper deviation rate is 7%,the sample deviation rate is 3%,and the risk of assessing control risk too low is 5%.Which of the following is true?

Which of the following statements is correct concerning statistical sampling in compliance testing?

As a result of tests of controls,an auditor incorrectly assessed control risk too low and decreased substantive testing.This assessment occurred because the true deviation rate in the population was

Define sampling risk and nonsampling risk.

A control is deemed to be more important than thought at the time that attributes sampling parameters were set.The auditor is most likely to respond by

As a result of tests of controls,an auditor over relied on internal control and decreased substantive testing.This overreliance occurred because the true deviation rate in the population was

Which of the following combinations guarantees a larger sample size?

In which of the following cases would the auditor be most likely to conclude that all of the items in an account under consideration should be examined rather than tested on a sample basis?

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 Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Assurance,Attestation,and Internal Auditing Services

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting 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

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