Question 1

Which balance-related audit objective cannot be assessed using monetary unit sampling?

Accepted Answer

A)  Accuracy 
B)  Completeness 
C)  Existence 
D)  All of the above can be assessed using monetary unit sampling. 
A)  Accuracy 
B)  Completeness 
C)  Existence 
D)  All of the above can be assessed using monetary unit sampling.

Question 2

Attributes sampling tables can be used to evaluate results of tests of details with Acceptable risk of assessing control risk too low (ARACR) being replaced with acceptable risk of incorrect acceptance (ARIA).

Accepted Answer

A) True 
 B)False

Question 3

When errors are found in a sample, auditors in practice generally make the assumption:

Accepted Answer

A)  of a 100% assumption for all errors. 
B)  that the population errors are larger than the sample errors. 
C)  that the population errors are smaller than the sample errors. 
D)  that the actual sample errors are representative of the population errors. 
A)  of a 100% assumption for all errors. 
B)  that the population errors are larger than the sample errors. 
C)  that the population errors are smaller than the sample errors. 
D)  that the actual sample errors are representative of the population errors.

Question 4

Which of the following is not a disadvantage of monetary-unit-sampling?

Accepted Answer

A)  It may be difficult to select samples from large population without computer assistance. 
B)  The total misstatement bounds resulting when misstatements are found may be too low to be useful to the auditor. 
C)  The total misstatement bounds resulting when misstatements are found may be too high to be useful to the auditor. 
D)  Each of the above is a disadvantage. 
A)  It may be difficult to select samples from large population without computer assistance. 
B)  The total misstatement bounds resulting when misstatements are found may be too low to be useful to the auditor. 
C)  The total misstatement bounds resulting when misstatements are found may be too high to be useful to the auditor. 
D)  Each of the above is a disadvantage.

Question 5

Which of the following items is not needed to apply MUS?

Accepted Answer

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

Question 6

You are auditing Nelson and Company and determined that the sample results support a conclusion that the account is materially misstated, when in fact it was not misstated. This illustrates the risk of:

Accepted Answer

A)  incorrect acceptance. 
B)  incorrect rejection. 
C)  control risk too low. 
D)  control risk too high. 
A)  incorrect acceptance. 
B)  incorrect rejection. 
C)  control risk too low. 
D)  control risk too high.

Question 7

What is the purpose of applying stratified sampling to a population?

Accepted Answer

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

Question 8

In monetary unit sampling, a sampling interval of 900 means that:

Accepted Answer

A)  every 900th item will be selected. 
B)  every 900th dollar in the account will be sampled. 
C)  expected misstatement is 900. 
D)  tolerable misstatement is 900. 
A)  every 900th item will be selected. 
B)  every 900th dollar in the account will be sampled. 
C)  expected misstatement is 900. 
D)  tolerable misstatement is 900.

Question 9

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 5 of the 9 steps included in the "plan the sample" section for nonstatistical sampling.

Accepted Answer

The steps comprising the "plan the sampl

Question 10

Why do auditors find MUS appealing?

Accepted Answer

A)  MUS increases the likelihood of selecting a balance of high and low dollar items. 
B)  MUS is easy to use in the audit environment. 
C)  MUS provides a nonstatistical, rather than a statistical, conclusion. 
D)  When misstatements are found, MUS rarely produces bounds in excess of materiality. 
A)  MUS increases the likelihood of selecting a balance of high and low dollar items. 
B)  MUS is easy to use in the audit environment. 
C)  MUS provides a nonstatistical, rather than a statistical, conclusion. 
D)  When misstatements are found, MUS rarely produces bounds in excess of materiality.

Question 11

Which of the following is not a type of statistical method that provides results in dollar terms?

Accepted Answer

A)  Variables sampling 
B)  Attributes sampling 
C)  Monetary-unit sampling 
D)  Sampling with probability proportional to size 
A)  Variables sampling 
B)  Attributes sampling 
C)  Monetary-unit sampling 
D)  Sampling with probability proportional to size

Question 12

Based on the information presented above, you are to indicate for the specified case from the table the required sample size to be selected from population 1 relative to the sample from population 2. In case 2, the required sample from population 1 is:

Accepted Answer

A)  larger than the required sample size from population 2. 
B)  equal to the required sample size from population 2. 
C)  smaller than the required sample size from population 2. 
D)  indeterminate relative to the required sample size from population 2. 
A)  larger than the required sample size from population 2. 
B)  equal to the required sample size from population 2. 
C)  smaller than the required sample size from population 2. 
D)  indeterminate relative to the required sample size from population 2.

Question 13

An important statistic to consider when using a statistical sampling audit plan is the population variability. The population variability is measured by the:

Accepted Answer

A)  sample mean. 
B)  standard deviation. 
C)  standard error of the sample mean. 
D)  estimated population total minus the actual population. 
A)  sample mean. 
B)  standard deviation. 
C)  standard error of the sample mean. 
D)  estimated population total minus the actual population.

Question 14

Which of the following does not have to be considered in determining the initial sample size of a test of details?

Accepted Answer

A)  tolerable misstatement 
B)  acceptable risk of incorrect rejection 
C)  estimate of misstatements in the population 
D)  acceptable audit risk 
A)  tolerable misstatement 
B)  acceptable risk of incorrect rejection 
C)  estimate of misstatements in the population 
D)  acceptable audit risk

Question 15

In estimating the population misstatement, the first step in projecting from the sample to the population is to:

Accepted Answer

A)  make a point estimate. 
B)  revise the upper error bound. 
C)  calculate the precision interval. 
D)  determine the population mean. 
A)  make a point estimate. 
B)  revise the upper error bound. 
C)  calculate the precision interval. 
D)  determine the population mean.

Question 16

The auditors principal objective when using a sample of tests of details of balances is whether the:

Accepted Answer

A)  account balance being audited is fairly stated. 
B)  transactions being audited are free of misstatements. 
C)  controls being tested are operating effectively. 
D)  transactions and account balances being audited are fairly stated. 
A)  account balance being audited is fairly stated. 
B)  transactions being audited are free of misstatements. 
C)  controls being tested are operating effectively. 
D)  transactions and account balances being audited are fairly stated.

Question 17

If the auditor believes that there will be more than just a few exceptions discovered, and desires an accurate estimate of the dollar value of the exceptions, he or she will use:

Accepted Answer

A)  attributes sampling. 
B)  monetary-unit sampling. 
C)  block sampling. 
D)  variables sampling. 
A)  attributes sampling. 
B)  monetary-unit sampling. 
C)  block sampling. 
D)  variables sampling.

Question 18

The risk the auditor is willing to take of accepting a balance as correct when the true misstatement in the balance under audit is greater than the tolerable misstatement is:

Accepted Answer

A)  the upper bound. 
B)  the tolerable risk. 
C)  the acceptable risk of incorrect acceptance. 
D)  the lower bound. 
A)  the upper bound. 
B)  the tolerable risk. 
C)  the acceptable risk of incorrect acceptance. 
D)  the lower bound.

Question 19

Acceptable risk of assessing control risk too low (ARACR) and acceptable risk of incorrect acceptance (ARIA) are inversely related; that is, a decrease in ARACR is accompanied by an increase in ARIA.

Accepted Answer

A) True 
 B)False

Question 20

Explain the decision rule used in monetary-unit sampling to determine whether the population value (account balance) is acceptable.

Accepted Answer

The auditor will accept the conclusion t

Exam 17: Audit Sampling for Tests of Details and Balances

Which balance-related audit objective cannot be assessed using monetary unit sampling?

Attributes sampling tables can be used to evaluate results of tests of details with Acceptable risk of assessing control risk too low (ARACR) being replaced with acceptable risk of incorrect acceptance (ARIA).

When errors are found in a sample, auditors in practice generally make the assumption:

Which of the following is not a disadvantage of monetary-unit-sampling?

Which of the following items is not needed to apply MUS?

You are auditing Nelson and Company and determined that the sample results support a conclusion that the account is materially misstated, when in fact it was not misstated. This illustrates the risk of:

What is the purpose of applying stratified sampling to a population?

In monetary unit sampling, a sampling interval of 900 means that:

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 5 of the 9 steps included in the "plan the sample" section for nonstatistical sampling.

Why do auditors find MUS appealing?

Which of the following is not a type of statistical method that provides results in dollar terms?

Based on the information presented above, you are to indicate for the specified case from the table the required sample size to be selected from population 1 relative to the sample from population 2. In case 2, the required sample from population 1 is:

An important statistic to consider when using a statistical sampling audit plan is the population variability. The population variability is measured by the:

Which of the following does not have to be considered in determining the initial sample size of a test of details?

In estimating the population misstatement, the first step in projecting from the sample to the population is to:

The auditors principal objective when using a sample of tests of details of balances is whether the:

If the auditor believes that there will be more than just a few exceptions discovered, and desires an accurate estimate of the dollar value of the exceptions, he or she will use:

The risk the auditor is willing to take of accepting a balance as correct when the true misstatement in the balance under audit is greater than the tolerable misstatement is:

Acceptable risk of assessing control risk too low (ARACR) and acceptable risk of incorrect acceptance (ARIA) are inversely related; that is, a decrease in ARACR is accompanied by an increase in ARIA.

Explain the decision rule used in monetary-unit sampling to determine whether the population value (account balance) is acceptable.

The Demand for Audit and Other Assurance Services

The CPA Profession

Audit Reports

Professional Ethics

Legal Liability

The CPA Profession

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Section 404 Audits of Internal Control and Control Risk

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit of the Acquisition and Payment Cycle: Tests of Controls and Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

Filters