Question 1

An account is at a higher risk of misstatement when it requires:

Accepted Answer

A)  complex calculations. 
B)  estimation. 
C)  both a and b. 
D)  simple valuation techniques. 
A)  complex calculations. 
B)  estimation. 
C)  both a and b. 
D)  simple valuation techniques.

Question 2

Control risk is the risk that:

Accepted Answer

A)  an auditor expresses an inappropriate audit opinion when a financial statement is materially misstated. 
B)  an auditor's substantive procedures will not detect material misstatements. 
C)  a client's system of internal controls will not prevent or detect a material misstatement. 
D)  none of the above. 
A)  an auditor expresses an inappropriate audit opinion when a financial statement is materially misstated. 
B)  an auditor's substantive procedures will not detect material misstatements. 
C)  a client's system of internal controls will not prevent or detect a material misstatement. 
D)  none of the above.

Question 3

Tolerable error is the minimum error an auditor is willing to accept within the population
tested.

Accepted Answer

A) True 
 B)False

Question 4

Before selecting a sample, an auditor will use professional judgment to:

Accepted Answer

A)  set the required level of confidence. 
B)  set the tolerable error rate. 
C)  select an appropriate population for testing. 
D)  all of the above. 
A)  set the required level of confidence. 
B)  set the tolerable error rate. 
C)  select an appropriate population for testing. 
D)  all of the above.

Question 5

If the total projected error in an account balance was $3,248 and the tolerable error was set at $10,000, the auditor would:

Accepted Answer

A)  conclude that the errors uncovered are material. 
B)  decide that further audit work was required. 
C)  conclude that the errors detected are not material. 
D)  conduct other tests aimed at the assertion being tested. 
A)  conclude that the errors uncovered are material. 
B)  decide that further audit work was required. 
C)  conclude that the errors detected are not material. 
D)  conduct other tests aimed at the assertion being tested.

Question 6

When conducting detailed substantive procedures, auditors search for evidence that:

Accepted Answer

A)  the client's internal control system is operating effectively. 
B)  all transactions have been recorded in the correct accounts. 
C)  no fraud has occurred during the year. 
D)  they have remained independent of their clients. 
A)  the client's internal control system is operating effectively. 
B)  all transactions have been recorded in the correct accounts. 
C)  no fraud has occurred during the year. 
D)  they have remained independent of their clients.

Question 7

Which of the following is a factor that influences the sample size when testing controls?

Accepted Answer

A)  an increase in the auditor's assessment of the risk of material misstatement 
B)  an increase in the tolerable rate of deviation 
C)  stratification of the population when appropriate 
D)  an increase in tolerable misstatement 
A)  an increase in the auditor's assessment of the risk of material misstatement 
B)  an increase in the tolerable rate of deviation 
C)  stratification of the population when appropriate 
D)  an increase in tolerable misstatement

Question 8

Indicate whether you agree or disagree with the following statements and explain your reasoning.
a) Karen Elliott was explaining to her group partner that the completeness assertion implies that transactions and events that have been recorded have occurred and pertain to the entity.
b) Joseph Cabana was explaining to Carl Metz how sampling risk works for the audit team: "Sampling risk is the risk that as auditors we will arrive at a conclusion that has nothing to do with sampling issues."
c) Robert Scardera was vehemently arguing about the benefits of using non-statistical versus statistical sampling methods for a client in the excavation business. Here is what he had to say about non-statistical sampling: "Non-statistical sampling is easier to use than statistical sampling, it requires less staff training, it has lower cost, and it allows an auditor to make a sample choice that they believe is appropriate."
d) Elaine Mathers has started her sample selection of sales transactions for a gemstone conglomerate. She believes that she can improve audit efficiency by stratifying the sample.

Accepted Answer

a) Disagree. The occurrence assertion im

Question 9

Sampling risk is the risk that the sample chosen by the auditor is not representative of the
population available for testing.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements regarding statistical sampling is correct?

Accepted Answer

A)  It is easier to use than non-statistical sampling. 
B)  It involves haphazard selection. 
C)  It is generally used for low risk accounts. 
D)  It involves random selection. 
A)  It is easier to use than non-statistical sampling. 
B)  It involves haphazard selection. 
C)  It is generally used for low risk accounts. 
D)  It involves random selection.

Question 11

Non-sampling risk arises when an auditor:

Accepted Answer

A)  does not use sampling. 
B)  uses an inappropriate audit procedure. 
C)  tests all of the items in a population. 
D)  spends too much time testing the accounts most at risk of material misstatement. 
A)  does not use sampling. 
B)  uses an inappropriate audit procedure. 
C)  tests all of the items in a population. 
D)  spends too much time testing the accounts most at risk of material misstatement.

Question 12

Daniel Beauchamp did not perform a true sample when he went to his client to examine sales invoices. He did not use any specific method for choosing the invoices. He let his eye
Catch the items he thought might make up his sample. What technique did he use?

Accepted Answer

A)  random selection 
B)  block selection 
C)  haphazard selection 
D)  stratified sample selection 
A)  random selection 
B)  block selection 
C)  haphazard selection 
D)  stratified sample selection

Question 13

Milushka Icaza, who was representing her CPA firm at a conference, made the following statement about assertions: When our auditors conduct substantive procedures, we search for
Evidence that recorded accounts exist and that all accounts that should have been recorded,
Indeed have been recorded. Which assertions was she talking about?

Accepted Answer

A)  rights and obligations and recording 
B)  valuation and allocation and recording 
C)  occurrence and completeness 
D)  none of the above 
A)  rights and obligations and recording 
B)  valuation and allocation and recording 
C)  occurrence and completeness 
D)  none of the above

Question 14

An audit plan includes the audit procedures to be used when testing controls and when
conducting detailed substantive audit procedures.

Accepted Answer

A) True 
 B)False

Question 15

Block selection involves the selection of items that are grouped together within the population
of items available.

Accepted Answer

A) True 
 B)False

Question 16

Explain sampling risk as it relates to both tests of controls and substantive procedures.

Accepted Answer

Sampling risk is the risk that the sampl

Question 17

The timing of audit testing refers to the stage of the audit when procedures are performed
and the date that audit evidence relates to.

Accepted Answer

A) True 
 B)False

Question 18

Henrietta Lombardi assessed control risk to be low. What is the appropriate audit strategy she should adopt?

Accepted Answer

A)  predominantly substantive audit approach 
B)  control testing strategy 
C)  combined audit strategy 
D)  substantive year end testing 
A)  predominantly substantive audit approach 
B)  control testing strategy 
C)  combined audit strategy 
D)  substantive year end testing

An account is at a higher risk of misstatement when it requires:

Control risk is the risk that:

Tolerable error is the minimum error an auditor is willing to accept within the population tested.

Before selecting a sample, an auditor will use professional judgment to:

If the total projected error in an account balance was $3,248 and the tolerable error was set at $10,000, the auditor would:

When conducting detailed substantive procedures, auditors search for evidence that:

Which of the following is a factor that influences the sample size when testing controls?

Sampling risk is the risk that the sample chosen by the auditor is not representative of the population available for testing.

Which of the following statements regarding statistical sampling is correct?

Non-sampling risk arises when an auditor:

Daniel Beauchamp did not perform a true sample when he went to his client to examine sales invoices. He did not use any specific method for choosing the invoices. He let his eye Catch the items he thought might make up his sample. What technique did he use?

An audit plan includes the audit procedures to be used when testing controls and when conducting detailed substantive audit procedures.

Block selection involves the selection of items that are grouped together within the population of items available.

Explain sampling risk as it relates to both tests of controls and substantive procedures.

The timing of audit testing refers to the stage of the audit when procedures are performed and the date that audit evidence relates to.

Henrietta Lombardi assessed control risk to be low. What is the appropriate audit strategy she should adopt?

Introduction and Overview of Audit and Assurance

Ethics, Legal Liability and Client Acceptance

Audit Planning I

Audit Planning II

Audit Evidence

Gaining an Understanding of the Clients System of Internal Controls

Execution of the Audittesting of Controls

Execution of the Auditperforming Substantive Procedures

Substantive Testing and Balance Sheet Accounts

Substantive Testing and Income Statement Accounts

Completing and Reporting on the Audit

Filters

Exam 6: Sampling and Overview of the Risk Response Phase of the Audit

An account is at a higher risk of misstatement when it requires:

Control risk is the risk that:

Tolerable error is the minimum error an auditor is willing to accept within the population tested.

Before selecting a sample, an auditor will use professional judgment to:

If the total projected error in an account balance was $3,248 and the tolerable error was set at $10,000, the auditor would:

When conducting detailed substantive procedures, auditors search for evidence that:

Which of the following is a factor that influences the sample size when testing controls?

Sampling risk is the risk that the sample chosen by the auditor is not representative of the population available for testing.

Which of the following statements regarding statistical sampling is correct?

Non-sampling risk arises when an auditor:

Daniel Beauchamp did not perform a true sample when he went to his client to examine sales invoices. He did not use any specific method for choosing the invoices. He let his eye Catch the items he thought might make up his sample. What technique did he use?

An audit plan includes the audit procedures to be used when testing controls and when conducting detailed substantive audit procedures.

Block selection involves the selection of items that are grouped together within the population of items available.

Explain sampling risk as it relates to both tests of controls and substantive procedures.

The timing of audit testing refers to the stage of the audit when procedures are performed and the date that audit evidence relates to.

Henrietta Lombardi assessed control risk to be low. What is the appropriate audit strategy she should adopt?

Introduction and Overview of Audit and Assurance

Ethics, Legal Liability and Client Acceptance

Audit Planning I

Audit Planning II

Audit Evidence

Gaining an Understanding of the Clients System of Internal Controls

Execution of the Audittesting of Controls

Execution of the Auditperforming Substantive Procedures

Substantive Testing and Balance Sheet Accounts

Substantive Testing and Income Statement Accounts

Completing and Reporting on the Audit

Filters