Question 1

Which of the following statements regarding block sampling is least likely to be true?

Accepted Answer

A)  Block sampling is the selection of several items in sequence. 
B)  It is acceptable to use block sampling for tests of transactions only if a reasonable number of blocks is used. 
C)  Only one block should be selected to increase the probability of a representative sample. 
D)  Once the first item in the block is selected, the remainder of the block is chosen automatically. 
A)  Block sampling is the selection of several items in sequence. 
B)  It is acceptable to use block sampling for tests of transactions only if a reasonable number of blocks is used. 
C)  Only one block should be selected to increase the probability of a representative sample. 
D)  Once the first item in the block is selected, the remainder of the block is chosen automatically.

Question 2

A sample of all items in a population will have a zero sampling risk.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following must be set prior to testing a sample?

Accepted Answer

A)  Sample exception rate. 
B)  Achieved upper precision limit. 
C)  Computed exception rate. 
D)  Tolerable exception rate. 
A)  Sample exception rate. 
B)  Achieved upper precision limit. 
C)  Computed exception rate. 
D)  Tolerable exception rate.

Question 4

Correspondence is established between the random number table and the population by:

Accepted Answer

A)  identifying each item in the population with a unique number. 
B)  deciding the number of digits to use in the random number table and their association with the population numbering system. 
C)  defining which digits the auditor uses in a column and the method of reading the table. 
D)  selecting a random starting point on the table. 
A)  identifying each item in the population with a unique number. 
B)  deciding the number of digits to use in the random number table and their association with the population numbering system. 
C)  defining which digits the auditor uses in a column and the method of reading the table. 
D)  selecting a random starting point on the table.

Question 5

If a particular internal control is not followed by the client exactly 6% of the time, and the auditor's tests of that control find three control violations in a sample of 50, the sample is considered to be representative.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following represents the best description of the tolerable exception?

Accepted Answer

A)  The highest exception rate the auditor will permit in the control being tested and still conclude it is operating effectively. 
B)  The highest exception rate the auditor expects to find in the population. 
C)  The number of exceptions found in the sample divided by the sample size. 
D)  The highest estimated exception rate in a population at a given ARACR. 
A)  The highest exception rate the auditor will permit in the control being tested and still conclude it is operating effectively. 
B)  The highest exception rate the auditor expects to find in the population. 
C)  The number of exceptions found in the sample divided by the sample size. 
D)  The highest estimated exception rate in a population at a given ARACR.

Question 7

Which one of the choices below is most correct regarding a cause of sampling risk?

Accepted Answer

A)  ineffective use of audit procedures 
B)  testing less than the entire population 
C)  use of extensive tests of controls 
D)  the possibility that a properly-selected sample still may not be representative 
A)  ineffective use of audit procedures 
B)  testing less than the entire population 
C)  use of extensive tests of controls 
D)  the possibility that a properly-selected sample still may not be representative

Question 8

Match eight of the terms (a-k) with the definitions provided below (1-8):
a. Haphazard selection
b. Attributes sampling
c. Block sample selection
d. Judgmental sampling
e. Non-probabilistic sample selection
f. Probabilistic sample selection
g. Random sample
h. Representative sample
i. Statistical sampling
j. Systematic sample selection
k. Sampling distribution
________ 1. The use of mathematical measurement techniques to calculate formal statistical results and quantify sampling risk.
________ 2. A non-probabilistic method of sample selection in which items are selected in measured sequences.
________ 3. A sample whose characteristics are the same as those of the population.
________ 4. A statistical, probabilistic method of sample evaluation that results in an estimate of the proportion of items in a population containing a characteristic of interest.
________ 5. A non-probabilistic method of sample selection in which items are chosen without regard to their size, source, or other distinguishing characteristics.
________ 6. An auditor selects items such that each population item has a known probability of being included in the sample.
________ 7. A frequency distribution of the results of all possible samples of a specified size that could be obtained from a population containing some specific parameters.
________ 8. A sample in which every possible combination of elements in the population has an equal chance of constituting the sample.

Accepted Answer

1. i
2. c

Question 9

The relationship of tolerable exception rate (TER) to sample size is:

Accepted Answer

A)  direct (larger TER = larger sample). 
B)  inverse (larger TER = smaller sample). 
C)  variable (sometimes larger, sometimes smaller). 
D)  not determinable. 
A)  direct (larger TER = larger sample). 
B)  inverse (larger TER = smaller sample). 
C)  variable (sometimes larger, sometimes smaller). 
D)  not determinable.

Question 10

In systematic sample selection, the population size is divided by the number of sample items desired in order to determine the:

Accepted Answer

A)  sampling interval. 
B)  tolerable exception rate. 
C)  computed upper exceptions rate. 
D)  mean. 
A)  sampling interval. 
B)  tolerable exception rate. 
C)  computed upper exceptions rate. 
D)  mean.

Question 11

If an auditor judgmentally selects a sample of one hundred items from a population and finds two exceptions, the auditor:

Accepted Answer

A)  can conclude that the sample exception rate is 2%. 
B)  can conclude that the population exception rate is 2%. 
C)  can calculate the highest exception rate expected in the population. 
D)  cannot make any conclusions about either the sample or the population. 
A)  can conclude that the sample exception rate is 2%. 
B)  can conclude that the population exception rate is 2%. 
C)  can calculate the highest exception rate expected in the population. 
D)  cannot make any conclusions about either the sample or the population.

Question 12

What is an auditor's evaluation of a statistical sample for attributes when a test of 100 documents results in four exceptions if the tolerable exception rate is 5%, the expected population exception rate is 3%, and the allowance for sampling risk is 2%?

Accepted Answer

A)  Accept the sample results as support for planned reliance on the control because the tolerable rate less the allowance for sampling risk equals the expected population exception rate. 
B)  Modify planned reliance on the control because the sample exception rate plus the allowance for sampling risk exceeds the tolerable rate. 
C)  Modify planned reliance on the control because the tolerable rate plus the allowance for sampling risk exceeds the expected population exception rate. 
D)  Accept the sample results as support for planned reliance on the control because the sample deviation rate plus the allowance for sampling risk exceeds the tolerable rate. 
A)  Accept the sample results as support for planned reliance on the control because the tolerable rate less the allowance for sampling risk equals the expected population exception rate. 
B)  Modify planned reliance on the control because the sample exception rate plus the allowance for sampling risk exceeds the tolerable rate. 
C)  Modify planned reliance on the control because the tolerable rate plus the allowance for sampling risk exceeds the expected population exception rate. 
D)  Accept the sample results as support for planned reliance on the control because the sample deviation rate plus the allowance for sampling risk exceeds the tolerable rate.

Question 13

If the result obtained from a particular sample for control and substantive tests of transactions is critical to the formation of an audit opinion, which of the following is the most important to the auditor in concluding of the appropriateness and sufficiency of evidence gathered?

Accepted Answer

A)  Acceptable risk of assessing control risk too low. 
B)  Estimated population exception rate. 
C)  Tolerable exception rate. 
D)  Size of the population. 
A)  Acceptable risk of assessing control risk too low. 
B)  Estimated population exception rate. 
C)  Tolerable exception rate. 
D)  Size of the population.

Question 14

Acceptable risk of assessing control risk too low is the risk that the auditor is willing to take in accepting a control as effective when the true population exception rate is greater than the estimated population exception rate.

Accepted Answer

A) True 
 B)False

Question 15

The auditor's best estimate of the population exception rate is the:

Accepted Answer

A)  current year's sample exception rate. 
B)  tolerable exception rate. 
C)  prior year's sample exception rate. 
D)  computed upper exception rate. 
A)  current year's sample exception rate. 
B)  tolerable exception rate. 
C)  prior year's sample exception rate. 
D)  computed upper exception rate.

Question 16

Which of the following is the risk that an auditor will reach an incorrect conclusion because a sample is not representative of the population?

Accepted Answer

A)  Sampling risk 
B)  Nonsampling risk 
C)  Audit risk 
D)  Detection risk 
A)  Sampling risk 
B)  Nonsampling risk 
C)  Audit risk 
D)  Detection risk

Question 17

Which of the following is not a term related to evaluating results in audit sampling until after a sample is tested and evaluated?

Accepted Answer

A)  Sample exception rate. 
B)  Estimated population exception rate. 
C)  Computed upper exception rate. 
D)  Exception. 
A)  Sample exception rate. 
B)  Estimated population exception rate. 
C)  Computed upper exception rate. 
D)  Exception.

Question 18

Attributes sampling would be an appropriate method to use on which one of the following procedures in an audit program?

Accepted Answer

A)  Review sales transactions for large and unreasonable amounts. 
B)  Observe whether the duties of the accounts receivable clerk are separate from handling cash. 
C)  Examine a sample of duplicate sales invoices for credit approval by the credit manager. 
D)  Review the aged schedule of accounts receivable to determine if receivables from officers are included. 
A)  Review sales transactions for large and unreasonable amounts. 
B)  Observe whether the duties of the accounts receivable clerk are separate from handling cash. 
C)  Examine a sample of duplicate sales invoices for credit approval by the credit manager. 
D)  Review the aged schedule of accounts receivable to determine if receivables from officers are included.

Question 19

Even when nonsampling risk is zero, there is always a possibility that a sample is not representative of the population.

Accepted Answer

A) True 
 B)False

Question 20

There are 14 steps to attributes sampling, divided into three sections: plan the sample, select the sample and perform the audit procedures, and evaluate the results. In the planning section there are 9 steps, beginning with "state the audit objective" and ending with "determine the initial sample size". Name and discuss at least 3 steps between the ones listed above.

Accepted Answer

The steps that comprise the "plan the sa

Exam 15: Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Which of the following statements regarding block sampling is least likely to be true?

A sample of all items in a population will have a zero sampling risk.

Which of the following must be set prior to testing a sample?

Correspondence is established between the random number table and the population by:

If a particular internal control is not followed by the client exactly 6% of the time, and the auditor's tests of that control find three control violations in a sample of 50, the sample is considered to be representative.

Which of the following represents the best description of the tolerable exception?

Which one of the choices below is most correct regarding a cause of sampling risk?

The relationship of tolerable exception rate (TER) to sample size is:

In systematic sample selection, the population size is divided by the number of sample items desired in order to determine the:

If an auditor judgmentally selects a sample of one hundred items from a population and finds two exceptions, the auditor:

What is an auditor's evaluation of a statistical sample for attributes when a test of 100 documents results in four exceptions if the tolerable exception rate is 5%, the expected population exception rate is 3%, and the allowance for sampling risk is 2%?

If the result obtained from a particular sample for control and substantive tests of transactions is critical to the formation of an audit opinion, which of the following is the most important to the auditor in concluding of the appropriateness and sufficiency of evidence gathered?

Acceptable risk of assessing control risk too low is the risk that the auditor is willing to take in accepting a control as effective when the true population exception rate is greater than the estimated population exception rate.

The auditor's best estimate of the population exception rate is the:

Which of the following is the risk that an auditor will reach an incorrect conclusion because a sample is not representative of the population?

Which of the following is not a term related to evaluating results in audit sampling until after a sample is tested and evaluated?

Attributes sampling would be an appropriate method to use on which one of the following procedures in an audit program?

Even when nonsampling risk is zero, there is always a possibility that a sample is not representative of the population.

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

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

Audit Sampling for Tests of Details and Balances

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

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