Deck 9: Tools to Gather Audit Evidence

Question 1

If the statistical confidence level is 90 per cent, the detection risk (DR) is 10 per cent.

Answer 1

True

Question 2

Both statistical and non-statistical sampling require significant audit judgement.

Answer 2

True

Question 3

The auditor does not consider cost/benefit when deciding to use statistical or non-statistical sampling.

Answer 3

False

Question 4

Evaluating statistical sample results is one of the tasks performed by generalised audit software (GAS).

Question 5

All audits involve sampling because the auditor cannot examine all of the transactions during a period.

Question 6

In non-statistical sampling the sample size is determined by auditor judgement.

Question 7

Monetary unit sampling (MUS) is designed to test for understatement of a population.

Question 8

Attribute estimation sampling is an especially usefully technique in situations where the audit question can be answered with a yes or no.

Question 9

Audit sampling is used to obtain evidence about each of the following except:

A) test of controls for the purpose of assessing control risk
B) efficiency of control procedures
C) test for compliance with company policies, governmental regulations or other criteria
D) test individual items in account balances for determining if material misstatement exists

Question 10

Which of the following is not a judgement the auditor makes in determining the appropriate sample size?

A) the sampling risk
B) the period covered by testing
C) the expected failure rate
D) the tolerable failure rate

Question 11

In non-statistical sampling which of the following is not a benefit?

A) Additional software is not required.
B) It requires audit judgement to determine an appropriate sample size.
C) The auditor can use prior expectations about errors in the account.
D) It may take less time to plan, select and evaluate the sample.

Question 12

Non-statistical sampling may be utilised for:
$\begin{array}{ll} \text {Tests of controls }& \text { Substantive testing} \\\end{array}$

A) $\begin{array}{ll} \quad\text {Yes} &\quad\quad\quad\quad\quad\quad\quad \text {Yes} \\\end{array}$
B) $\begin{array}{ll}\quad \text {Yes }& \quad\quad\quad\quad\quad\quad\quad\text { No }\\\end{array}$
C) $\begin{array}{ll} \quad\text {No} & \quad\quad\quad\quad\quad\quad\quad\quad\text { No} \\\end{array}$
D) $\begin{array}{ll} \quad\text {No }&\quad\quad\quad\quad\quad\quad\quad\quad \text { Yes}\end{array}$

Question 13

In monetary unit sampling (MUS), the expected amount of misstatement must be:

A) greater than tolerable misstatement
B) less than tolerable misstatement
C) equal to tolerable misstatement
D) all of these choices

Question 14

Which if the following is not a weakness of monetary unit sampling (MUS)?

A) MUS is generally easier to apply than other statistical sampling approaches
B) MUS is not designed to test for understatement of a population
C) Identified understatements in the MUS sample require special considerations.
D) Selection of zero or negative balances require special design considerations.

Question 15

In monetary unit sampling (MUS), which of the following is a strength of MUS?

A) MUS is generally easier to apply than other statistical approaches.
B) MUS is not designed to test for understatement of a population.
C) Identified understatements in the MUS sample require special considerations.
D) Selection of zero or negative balances require special design considerations.

Question 16

In monetary unit sampling (MUS), which of the following could be a difficulty in using MUS?

A) MUS is not designed for the understatement of a population.
B) If an auditor identifies understatement in a MUS sample, evaluation of the sample requires special considerations.
C) Selection of zero or negative balances requires special design considerations.
D) All of these choices.

Question 17

Sampling is a very important procedure that:

A) gathers evidence to evaluate account balances
B) is the only audit procedure that is used
C) detects all control failures
D) requires limited audit judgement

Question 18

Monetary unit sampling (MUS) has all of the following advantages over other statistical methods except which?

A) It is easier to apply than other statistical sampling approaches.
B) It is developed especially for use in auditing.
C) The sample size is influenced by the standard failure of the population.
D) Usually results in a highly efficient sample size.

Question 19

A major disadvantage of monetary unit sampling (MUS) is which of the following?

A) Sample selection is relatively easy.
B) Sample sizes are relatively small.
C) It is difficult to test for understatement.
D) It directly controls for the risk of incorrect acceptance.

Question 20

Auditors use sampling to gather evidence to:

A) test controls for the purpose of assessing control risk
B) test for compliance with company policies
C) test individual items in account balances
D) all of these choices

Question 21

Whenever sampling is used, there is always a risk that:

A) the sample may not accurately reflect the population
B) the sample will accurately reflect the population
C) the sample will provide sufficient evidence
D) the sample will provide appropriate evidence

Question 22

Which of the following circumstances would not be the appropriate approach to use monetary unit sampling (MUS)?

A) the need to select a sample based on an item's dollar amount
B) tolerable misstatement
C) sampling interval
D) tainting percentage

Question 23

Statistical sampling deals with:

A) each item in the population having an equal chance of selection.
B) every nth item being selected after a random start.
C) an arbitrary selection with no conscious bias.
D) selecting all items on a day or week.

Question 24

In sample selection, judgement sampling deals with:

A) each item in the population having an equal chance of selection
B) every nth item being selected after a random start
C) an arbitrary selection with no conscious bias
D) selecting all items on a day or week

Question 25

The population for monetary unit sampling (MUS) is defined as:

A) the number of transactions in the population being tested
B) the number of dollars in the population being tested
C) the number of attributes
D) the number of transactions and dollars in the population being tested

Question 26

Auditors use sampling to gather evidence to:

A) test controls for the purpose of assessing control risk
B) test for compliance with company policies and government regulation
C) test individual items in account balances as a basis for determining whether material misstatement exists
D) test all the transactions

Question 27

In determining the appropriate sample size an auditor does not need to make judgements about:

A) sampling risk
B) expected failure rate
C) staff experience
D) tolerable failure rate

Question 28

Analytical procedures
A basic premise underlying the application of analytical procedures is that plausible relationships
among data may reasonably be expected to exist and continue in the absence of known conditions to the contrary. Identify five typical examples of analytical techniques, including relationships and sources of data.

Question 29

Monetary unit sampling (MUS)
What are the three strengths of monetary unit sampling? Provide examples of the circumstances in which monetary unit sampling (MUS) might be used.