Question 1

Which of the following statements is not correct regarding probabilistic and non-probabilistic sample selection?

Accepted Answer

A)  In probabilistic selection, every population item has a known chance of being selected. 
B)  It is not acceptable to make non-probabilistic evaluations using probabilistic selection. 
C)  Probabilistic selection is required for all statistical sampling methods. 
D)  Both methods are acceptable and commonly used. 
A)  In probabilistic selection, every population item has a known chance of being selected. 
B)  It is not acceptable to make non-probabilistic evaluations using probabilistic selection. 
C)  Probabilistic selection is required for all statistical sampling methods. 
D)  Both methods are acceptable and commonly used.

Question 2

The sample exception rate equals:

Accepted Answer

A)  the number of exceptions in the population divided by the sample size. 
B)  the number of items in the population multiplied by the number of exceptions in the sample. 
C)  the number of exceptions in the sample divided by the sample size. 
D)  the number of exceptions in the population divided by the population size. 
A)  the number of exceptions in the population divided by the sample size. 
B)  the number of items in the population multiplied by the number of exceptions in the sample. 
C)  the number of exceptions in the sample divided by the sample size. 
D)  the number of exceptions in the population divided by the population size.

Question 3

An auditor can increase the likelihood that a sample is representative by using care in:

Accepted Answer

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

Question 4

Directed sample selection is the selection of each item in the sample based on some judgment criteria established by the auditor. Discuss three commonly used criteria.

Accepted Answer

Commonly-used criteria used in directed

Question 5

To determine if a sample is truly representative of the population, an auditor would be required to:

Accepted Answer

A)  conduct multiple samples of the same population. 
B)  never use sampling because of the expense involved. 
C)  audit the entire population. 
D)  use systematic sample selection. 
A)  conduct multiple samples of the same population. 
B)  never use sampling because of the expense involved. 
C)  audit the entire population. 
D)  use systematic sample selection.

Question 6

What is the key advantage and disadvantage associated with systematic sample selection? How must auditors address this disadvantage?

Accepted Answer

The key advantage is its ease of use. Ge

Question 7

When a small preliminary sample is used to estimate the population exception rate, it (the preliminary sample) cannot be included in the ultimate sample.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following methods of sample selection is appropriately used when selecting a random sample?

Accepted Answer

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

Question 9

A principal advantage of statistical methods of attributes sampling over nonstatistical methods is that they provide a scientific basis for establishing the:

Accepted Answer

A)  risk of assessing control risk too low. 
B)  tolerable exception rate. 
C)  expected population exception rate. 
D)  sample size. 
A)  risk of assessing control risk too low. 
B)  tolerable exception rate. 
C)  expected population exception rate. 
D)  sample size.

Question 10

When using statistical sampling, the auditor would most likely require a smaller sample if the:

Accepted Answer

A)  population increases. 
B)  desired reliability decreases. 
C)  desired precision interval narrows. 
D)  expected exception rate increases. 
A)  population increases. 
B)  desired reliability decreases. 
C)  desired precision interval narrows. 
D)  expected exception rate increases.

Question 11

When auditors wish to evaluate a sample statistically, an acceptable selection method is:

Accepted Answer

A)  systematic sample selection. 
B)  judgmental selection. 
C)  haphazard selection. 
D)  block sample selection. 
A)  systematic sample selection. 
B)  judgmental selection. 
C)  haphazard selection. 
D)  block sample selection.

Question 12

In testing controls, an overreliance on internal controls that reduces substantive tests and increases the likelihood of not detecting a material misstatement occurs because:

Accepted Answer

A)  Deviation in the population was less than the sample. 
B)  true deviation in the population was greater than the sample. 
C)  auditor judgment was flawed. 
D)  it is inherent in the audit risk model. 
A)  Deviation in the population was less than the sample. 
B)  true deviation in the population was greater than the sample. 
C)  auditor judgment was flawed. 
D)  it is inherent in the audit risk model.

Question 13

In performing a review of a client's cash disbursements, an auditor uses systematic sample selection with a random start. The primary disadvantage of this technique is population items:

Accepted Answer

A)  may occur twice in the sample. 
B)  must be reordered in a systematic pattern before the sample can be drawn. 
C)  may occur in a systematic pattern, thus negating the randomness of the sample. 
D)  must be replaced in the population after sampling to permit valid statistical inference. 
A)  may occur twice in the sample. 
B)  must be reordered in a systematic pattern before the sample can be drawn. 
C)  may occur in a systematic pattern, thus negating the randomness of the sample. 
D)  must be replaced in the population after sampling to permit valid statistical inference.

Question 14

Discuss what is meant by "sampling risk" and "nonsampling risk".

Accepted Answer

Sampling risk occurs when the sample is

Question 15

The risk which the auditor is willing to take in accepting a control as being effective when the true population exception rate is greater than a tolerable rate is the:

Accepted Answer

A)  finite correction factor. 
B)  tolerable exception rate. 
C)  acceptable risk of assessing control risk too low. 
D)  estimated population exception rate. 
A)  finite correction factor. 
B)  tolerable exception rate. 
C)  acceptable risk of assessing control risk too low. 
D)  estimated population exception rate.

Question 16

The tolerable exception rate is the rate that the auditor will permit in the population and still be willing to conclude a control is effective.

Accepted Answer

A) True 
 B)False

Question 17

One of the ways to eliminate nonsampling risk is through:

Accepted Answer

A)  proper supervision and instruction of the client's employees. 
B)  proper supervision and instruction of the audit team. 
C)  the use of attributes sampling rather than variables sampling. 
D)  controls which ensure that the sample drawn is random and representative. 
A)  proper supervision and instruction of the client's employees. 
B)  proper supervision and instruction of the audit team. 
C)  the use of attributes sampling rather than variables sampling. 
D)  controls which ensure that the sample drawn is random and representative.

Question 18

Directed sample selection, block sample selection, and haphazard sample selection are three types of probabilistic sample selection methods.

Accepted Answer

A) True 
 B)False

Question 19

Discuss two causes of nonsampling risk. Also discuss ways the auditor can control nonsampling risk.

Accepted Answer

The two causes of nonsampling risk are (

Question 20

A sample in which the characteristics of the sample are the same as those of the population is a(n):

Accepted Answer

A)  variables sample. 
B)  representative sample. 
C)  attributes sample. 
D)  random sample. 
A)  variables sample. 
B)  representative sample. 
C)  attributes sample. 
D)  random sample.

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

Which of the following statements is not correct regarding probabilistic and non-probabilistic sample selection?

The sample exception rate equals:

An auditor can increase the likelihood that a sample is representative by using care in:

Directed sample selection is the selection of each item in the sample based on some judgment criteria established by the auditor. Discuss three commonly used criteria.

To determine if a sample is truly representative of the population, an auditor would be required to:

What is the key advantage and disadvantage associated with systematic sample selection? How must auditors address this disadvantage?

When a small preliminary sample is used to estimate the population exception rate, it (the preliminary sample) cannot be included in the ultimate sample.

Which of the following methods of sample selection is appropriately used when selecting a random sample?

A principal advantage of statistical methods of attributes sampling over nonstatistical methods is that they provide a scientific basis for establishing the:

When using statistical sampling, the auditor would most likely require a smaller sample if the:

When auditors wish to evaluate a sample statistically, an acceptable selection method is:

In testing controls, an overreliance on internal controls that reduces substantive tests and increases the likelihood of not detecting a material misstatement occurs because:

In performing a review of a client's cash disbursements, an auditor uses systematic sample selection with a random start. The primary disadvantage of this technique is population items:

Discuss what is meant by "sampling risk" and "nonsampling risk".

The risk which the auditor is willing to take in accepting a control as being effective when the true population exception rate is greater than a tolerable rate is the:

The tolerable exception rate is the rate that the auditor will permit in the population and still be willing to conclude a control is effective.

One of the ways to eliminate nonsampling risk is through:

Directed sample selection, block sample selection, and haphazard sample selection are three types of probabilistic sample selection methods.

Discuss two causes of nonsampling risk. Also discuss ways the auditor can control nonsampling risk.

A sample in which the characteristics of the sample are the same as those of the population is a(n):

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