Question 1

The most commonly used method of statistical sampling for tests of details of balances is:

Accepted Answer

A)  attributes sampling. 
B)  systematic sampling. 
C)  discovery sampling. 
D)  monetary-unit sampling. 
A)  attributes sampling. 
B)  systematic sampling. 
C)  discovery sampling. 
D)  monetary-unit sampling. D

Question 2

In evaluating sample results for tests of details, auditors must evaluate exceptions identified by the performance of audit procedures.

Accepted Answer

A) True 
 B)False  False

Question 3

Which of the following sampling plans would be designed to estimate a numerical measurement of a population, such as a dollar value?

Accepted Answer

A)  Numerical sampling. 
B)  Discovery sampling. 
C)  Attributes sampling. 
D)  Variable sampling. 
A)  Numerical sampling. 
B)  Discovery sampling. 
C)  Attributes sampling. 
D)  Variable sampling. D

Question 4

Estimated misstatement in the population and sample size are inversely related; that is, as estimated misstatement increases, sample size decreases.

Accepted Answer

A) True 
 B)False

Question 5

An auditor using nonstatistical sampling cannot formally measure sampling error and therefore must subjectively consider the possibility that the true population misstatement exceeds a tolerable amount. Which of the following factors should be considered by the auditor in making this assessment?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 6

An auditor using nonstatistical sampling cannot formally measure sampling error.

Accepted Answer

A) True 
 B)False

Question 7

Accounts with zero or negative year-end balances have no chance of being included in a standard probability proportional to size (PPS) sample.

Accepted Answer

A) True 
 B)False

Question 8

Acceptable risk of incorrect acceptance is directly affected by acceptable audit risk.

Accepted Answer

A) True 
 B)False

Question 9

The appropriate assumption to make regarding the overall percent of error in those population items containing an error is:

Accepted Answer

A)  determined using random number tables. 
B)  set after a quantitative analysis of client's internal control system. 
C)  based on the auditor's personal judgment in the circumstances. 
D)  based on statistical analysis using confidence limits. 
A)  determined using random number tables. 
B)  set after a quantitative analysis of client's internal control system. 
C)  based on the auditor's personal judgment in the circumstances. 
D)  based on statistical analysis using confidence limits.

Question 10

You are auditing Raji and Company. You discover an item of inventory with an audited value of $5,000 with a recorded amount of $3,000. If this is the only error you discover the projected misstatement for the sample would be:

Accepted Answer

A)  $5,000 
B)  $2,000 
C)  $3,000 
D)  $4,000 
A)  $5,000 
B)  $2,000 
C)  $3,000 
D)  $4,000

Question 11

There are 14 steps to audit sampling for details of balances, divided into three sections: plan the sample, select the sample and perform the audit procedures, and evaluate the results. Discuss each of the steps included in the "evaluate the results" section for nonstatistical sampling.

Accepted Answer

The steps included in the "evaluate the

Question 12

When selecting a sample size for substantive tests of balances which factor, other factors being equal, would result in a larger sample?

Accepted Answer

A)  smaller tolerable misstatement 
B)  small expected misstatements 
C)  greater tolerable misstatement 
D)  greater expected misstatement 
A)  smaller tolerable misstatement 
B)  small expected misstatements 
C)  greater tolerable misstatement 
D)  greater expected misstatement

Question 13

The major reason that the difference and ratio estimation methods would be expected to produce audit efficiency is that the:

Accepted Answer

A)  beta risk may be completely ignored. 
B)  variability of the populations of differences or ratios is less than that of the populations of book values or audited values. 
C)  number of members of the populations of differences or ratios is smaller than the number of members of the population of book values. 
D)  calculations required in using difference or ratio estimation are less arduous and fewer than those required when using direct estimation. 
A)  beta risk may be completely ignored. 
B)  variability of the populations of differences or ratios is less than that of the populations of book values or audited values. 
C)  number of members of the populations of differences or ratios is smaller than the number of members of the population of book values. 
D)  calculations required in using difference or ratio estimation are less arduous and fewer than those required when using direct estimation.

Question 14

Explain acceptable risk of incorrect acceptance and acceptable risk of incorrect rejection within the context of variables sampling.

Accepted Answer

After an audit test is performed and sta

Question 15

Calculating the sample size using monetary-unit-sampling depends on which of the following factors?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 16

When using monetary-unit sampling, the recorded dollar population is a definition of all the items in the:

Accepted Answer

A)  population. 
B)  population which the auditor has included in the sample. 
C)  population which contain errors. 
D)  sample which contain errors. 
A)  population. 
B)  population which the auditor has included in the sample. 
C)  population which contain errors. 
D)  sample which contain errors.

Question 17

The purpose of stratified sampling is to achieve a greater confidence level (lower risk of incorrect acceptance) for a given sample size.

Accepted Answer

A) True 
 B)False

Question 18

Acceptable risk of incorrect rejection affects auditors' action only when they conclude that a population is:

Accepted Answer

A)  fairly stated. 
B)  acceptable. 
C)  materially misstated. 
D)  acceptable after certain adjustments. 
A)  fairly stated. 
B)  acceptable. 
C)  materially misstated. 
D)  acceptable after certain adjustments.

Question 19

The population standard deviation of the misstatements from the sample is inversely related to the computed precision interval in difference estimation; that is, as the standard deviation increases, the computed precision interval decreases.

Accepted Answer

A) True 
 B)False

Question 20

There are four steps to generalize from the sample to the population using difference estimation sampling. Identify each of these four steps.

Accepted Answer

The four steps to generalize from the sa

Exam 17: Audit Sampling for Tests of Details and Balances

The most commonly used method of statistical sampling for tests of details of balances is:

In evaluating sample results for tests of details, auditors must evaluate exceptions identified by the performance of audit procedures.

Which of the following sampling plans would be designed to estimate a numerical measurement of a population, such as a dollar value?

Estimated misstatement in the population and sample size are inversely related; that is, as estimated misstatement increases, sample size decreases.

An auditor using nonstatistical sampling cannot formally measure sampling error and therefore must subjectively consider the possibility that the true population misstatement exceeds a tolerable amount. Which of the following factors should be considered by the auditor in making this assessment?

An auditor using nonstatistical sampling cannot formally measure sampling error.

Accounts with zero or negative year-end balances have no chance of being included in a standard probability proportional to size (PPS) sample.

Acceptable risk of incorrect acceptance is directly affected by acceptable audit risk.

The appropriate assumption to make regarding the overall percent of error in those population items containing an error is:

You are auditing Raji and Company. You discover an item of inventory with an audited value of $5,000 with a recorded amount of $3,000. If this is the only error you discover the projected misstatement for the sample would be:

There are 14 steps to audit sampling for details of balances, divided into three sections: plan the sample, select the sample and perform the audit procedures, and evaluate the results. Discuss each of the steps included in the "evaluate the results" section for nonstatistical sampling.

When selecting a sample size for substantive tests of balances which factor, other factors being equal, would result in a larger sample?

The major reason that the difference and ratio estimation methods would be expected to produce audit efficiency is that the:

Explain acceptable risk of incorrect acceptance and acceptable risk of incorrect rejection within the context of variables sampling.

Calculating the sample size using monetary-unit-sampling depends on which of the following factors?

When using monetary-unit sampling, the recorded dollar population is a definition of all the items in the:

The purpose of stratified sampling is to achieve a greater confidence level (lower risk of incorrect acceptance) for a given sample size.

Acceptable risk of incorrect rejection affects auditors' action only when they conclude that a population is:

The population standard deviation of the misstatements from the sample is inversely related to the computed precision interval in difference estimation; that is, as the standard deviation increases, the computed precision interval decreases.

There are four steps to generalize from the sample to the population using difference estimation sampling. Identify each of these four steps.

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