Question 1

What is the primary objective of using stratified sampling in auditing?

Accepted Answer

A)  To increase the confidence level at which a decision will be reached from the results of the sample selected. 
B)  To determine the occurrence rate for a given characteristic in the population being studied. 
C)  To decrease the effect of variance in the total population. 
D)  To determine the precision range of the sample selected. 
A)  To increase the confidence level at which a decision will be reached from the results of the sample selected. 
B)  To determine the occurrence rate for a given characteristic in the population being studied. 
C)  To decrease the effect of variance in the total population. 
D)  To determine the precision range of the sample selected.

Question 2

Tests for rates of occurrence are appropriately used in all but which of the following situations?

Accepted Answer

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

Question 3

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 1, 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 4

In the application of statistical techniques to the estimation of dollar amounts, a preliminary sample is usually taken primarily for the purpose of estimating the population:

Accepted Answer

A)  mode. 
B)  range. 
C)  median. 
D)  variability. 
A)  mode. 
B)  range. 
C)  median. 
D)  variability.

Question 5

The auditor must deal with layers of the computed upper deviation rate from the attributes table because there are different error assumptions for each error. Assume a sample of 100 had found one error, and the computed upper deviation rate is shown in the following table:
 
The precision limit for the layer with one error is:

Accepted Answer

A)  2.3%. 
B)  3.8% 
C)  6.1%. 
D)  1.5%. 
A)  2.3%. 
B)  3.8% 
C)  6.1%. 
D)  1.5%.

Question 6

Tolerable misstatement is inversely related to sample size.

Accepted Answer

A) True 
 B)False

Question 7

Acceptable risk of incorrect acceptance (ARIA) is directly related to the computed precision interval in difference estimation; that is, as ARIA increases, the computed precision interval decreases.

Accepted Answer

A) True 
 B)False

Question 8

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. Which of the following is the least likely auditor reaction to this discovery?

Accepted Answer

A)  Perform expanded audit tests in the relevant areas 
B)  Increase detection risk in the relevant areas 
C)  Increase the sample size 
D)  Take no action until tests of other audit areas are completed 
A)  Perform expanded audit tests in the relevant areas 
B)  Increase detection risk in the relevant areas 
C)  Increase the sample size 
D)  Take no action until tests of other audit areas are completed

Question 9

When using monetary-unit sampling, evaluating the likelihood of unrecorded items in the population is:

Accepted Answer

A)  unnecessary. 
B)  impossible. 
C)  possible but difficult. 
D)  an automatic outcome of the process. 
A)  unnecessary. 
B)  impossible. 
C)  possible but difficult. 
D)  an automatic outcome of the process.

Question 10

Acceptable risk of incorrect acceptance (ARIA) and sample size are inversely related; that is, as ARIA increases, sample size decreases.

Accepted Answer

A) True 
 B)False

Question 11

Using statistical sampling to assist in verifying the year-end accounts payable balance, an auditor has accumulated the following data:
 
Projecting the misstatement to the population, the auditor's estimate of year-end accounts payable balance would be:

Accepted Answer

A)  $5,050,000. 
B)  $5,125,000. 
C)  $6,000,000. 
D)  $6,150,000. 
A)  $5,050,000. 
B)  $5,125,000. 
C)  $6,000,000. 
D)  $6,150,000.

Question 12

When using nonstatistical sampling, the larger the sample size, the greater the auditor's confidence that the point estimate is close to the true population value.

Accepted Answer

A) True 
 B)False

Question 13

If acceptable audit risk is increased, acceptable risk of incorrect acceptance should be:

Accepted Answer

A)  increased. 
B)  reduced. 
C)  unaffected. 
D)  modified. 
A)  increased. 
B)  reduced. 
C)  unaffected. 
D)  modified.

Question 14

Identify each of the seven factors that influence sample size for nonstatistical tests of details of balances, and state whether each factor is directly or inversely related to sample size.

Accepted Answer

Factors that influence sample size for n

What is the primary objective of using stratified sampling in auditing?

Tests for rates of occurrence are appropriately used in all but which of the following situations?

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 1, the required sample from population 1 is:

In the application of statistical techniques to the estimation of dollar amounts, a preliminary sample is usually taken primarily for the purpose of estimating the population:

Tolerable misstatement is inversely related to sample size.

Acceptable risk of incorrect acceptance (ARIA) is directly related to the computed precision interval in difference estimation; that is, as ARIA increases, the computed precision interval decreases.

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. Which of the following is the least likely auditor reaction to this discovery?

When using monetary-unit sampling, evaluating the likelihood of unrecorded items in the population is:

Acceptable risk of incorrect acceptance (ARIA) and sample size are inversely related; that is, as ARIA increases, sample size decreases.

Using statistical sampling to assist in verifying the year-end accounts payable balance, an auditor has accumulated the following data: Projecting the misstatement to the population, the auditor's estimate of year-end accounts payable balance would be:

When using nonstatistical sampling, the larger the sample size, the greater the auditor's confidence that the point estimate is close to the true population value.

If acceptable audit risk is increased, acceptable risk of incorrect acceptance should be:

Identify each of the seven factors that influence sample size for nonstatistical tests of details of balances, and state whether each factor is directly or inversely related to sample size.

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

Exam 17: Audit Sampling for Tests of Details and Balances

What is the primary objective of using stratified sampling in auditing?

Tests for rates of occurrence are appropriately used in all but which of the following situations?

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 1, the required sample from population 1 is:

In the application of statistical techniques to the estimation of dollar amounts, a preliminary sample is usually taken primarily for the purpose of estimating the population:

Tolerable misstatement is inversely related to sample size.

Acceptable risk of incorrect acceptance (ARIA) is directly related to the computed precision interval in difference estimation; that is, as ARIA increases, the computed precision interval decreases.

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. Which of the following is the least likely auditor reaction to this discovery?

When using monetary-unit sampling, evaluating the likelihood of unrecorded items in the population is:

Acceptable risk of incorrect acceptance (ARIA) and sample size are inversely related; that is, as ARIA increases, sample size decreases.

Using statistical sampling to assist in verifying the year-end accounts payable balance, an auditor has accumulated the following data: Projecting the misstatement to the population, the auditor's estimate of year-end accounts payable balance would be:

When using nonstatistical sampling, the larger the sample size, the greater the auditor's confidence that the point estimate is close to the true population value.

If acceptable audit risk is increased, acceptable risk of incorrect acceptance should be:

Identify each of the seven factors that influence sample size for nonstatistical tests of details of balances, and state whether each factor is directly or inversely related to sample size.

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