Deck 17: Overview of Sampling

Question 1

The precision interval is determined by adding and subtracting the reliability from the sample estimate.

Answer 1

False

Question 2

The precision represents the closeness of an item to the true (unknown)population value.

Answer 2

False

Question 3

One method of increasing the likelihood that a representative sample is selected is ensuring that all items have an equal opportunity to be selected.

Answer 3

True

Question 4

Two methods of variables sampling are classical variables sampling and monetary unit sampling.

Question 5

Unrestricted random selection requires the auditor to systematically bypass a number of items in the population between selections.

Question 6

Statistical sampling plans ensure that samples are selected randomly from the population.

Question 7

The auditor typically cannot control nonsampling risk during an examination by selecting a larger number of items.

Question 8

Sampling risk typically occurs because of errors in judgment or execution.

Question 9

Block selection is typically not appropriate for use with statistical sampling applications.

Question 10

Sampling risk is the probability that the decision made based on the sample is different from the decision that would be made examining the entire population.

Question 11

The risk of assessing control risk too high relates to the effectiveness of an audit.

Question 12

If the adjusted sample rate of deviation exceeds the tolerable rate of deviation,the auditor should reduce the planned level of reliance on internal control.

Question 13

In variables sampling,the risk of incorrect acceptance relates to the effectiveness of the audit examination.

Question 14

Sampling is ordinarily used when the number of items composing the population is relatively small.

Question 15

If the population of interest is not carefully defined,it will be difficult for the auditor to select a sample that represents the population.

Question 16

Sampling typically involves examining less than 100 percent of the items composing a population of interest.

Question 17

Sampling risk has a direct relationship with sample size.

Question 18

The auditor uses attributes sampling during the study of internal control.

Question 19

In an attributes sampling application,the auditor is typically more concerned with controlling the risk of assessing control risk too low than the risk of assessing control risk too high.

Question 20

One of the advantages of sampling is that it is typically more effective than examining the entire population.

Question 21

What is the primary drawback with respect to the use of sampling?

A) Individuals may fail to obtain a true understanding of the question they are examining.
B) The time spent in planning and selecting the sample may exceed the time saved from examining only a subset of the items.
C) The conclusion reached by examining a sample of items may differ from the conclusion that would be reached if the entire population were examined.
D) Sampling cannot be used to examine account balances that are material to the financial statements.

Question 22

Which of the following statements best describes nonstatistical sampling?

A) Nonstatistical sampling does not allow the auditor to measure the exposure to sampling risk.
B) Nonstatistical sampling selects only very large dollar items for examination.
C) Nonstatistical sampling should be used only in situations in which the auditor anticipates issuing a qualified or adverse opinion on the client's financial statements.
D) Nonstatistical sampling should be used when the auditor selects a substantive audit approach.

Question 23

In sampling,an individual makes a statement about a _______________ of interest by examining a _______________ (or subset)of items

A) sample, population.
B) sampling unit, population.
C) population, sample.
D) population, sampling unit.

Question 24

Which of the following is not an advantage of statistical sampling?

A) It requires a precise and definite approach to the audit problem.
B) It incorporates evaluation that calculates a direct relation between the sample results and the entire population under audit.
C) It requires auditors to specify particular judgments on risk and overall materiality.
D) It permits the auditor to reapply evaluation judgments based on factors in addition to the sample evidence.

Question 25

Which of the following statements is true with regard to sampling?

A) Sampling can be used only in situations in which the population is relatively homogenous in nature.
B) Sampling is typically more efficient than examining the entire population.
C) Sampling is typically more effective than examining the entire population.
D) Sampling should be used when the need for more precise information is important.

Question 26

An auditor is most likely to use statistical sampling under which of the following situations?

A) Random numbers can be associated with population items.
B) Strictly defensible results based on mathematics are not necessary.
C) The auditor has a very good knowledge of the population.
D) The population is very diverse with some segments especially prone to misstatement.

Question 27

Which of the following steps in the sampling process is ordinarily performed last?

A) Determine the objective of sampling.
B) Measure sample items.
C) Evaluate the sample results.
D) Define the characteristic of interest.

Question 28

Which of the following types of sampling applications can appropriately be used under generally accepted auditing standards?

A) Statistical sampling, yes; nonstatistical sampling, yes.
B) Statistical sampling, yes; nonstatistical sampling, no.
C) Statistical sampling, no; nonstatistical sampling, yes.
D) Statistical sampling, no; nonstatistical sampling, no.

Question 29

The probability that an auditor's conclusion based on a sample might be different from the conclusion based on the entire population identifies the concept of:

A) Confidence levels.
B) Nonsampling risk.
C) Nonstatistical sampling.
D) Sampling risk.

Question 30

Which of the following allows the auditor to limit the exposure to sampling risk?

A) Determining an appropriate sample size, yes; performing an appropriate audit procedure, yes.
B) Determining an appropriate sample size, yes; performing an appropriate audit procedure, no.
C) Determining an appropriate sample size, no; performing an appropriate audit procedure, yes.
D) Determining an appropriate sample size, no; performing an appropriate audit procedure, no.

Question 31

If a golf professional is interested in determining whether a golf ball can be hit over 300 yards,which of the following relationships between the adjusted sample estimate of distance and the actual distance would represent sampling risk?

A) Adjusted estimate = 295 yards; actual = 298 yards.
B) Adjusted estimate = 305 yards; actual = 301 yards.
C) Adjusted estimate = 310 yards; actual = 295 yards.
D) All of the above are examples of sampling risk.

Question 32

Place the following steps in the sampling process in the order in which they are performed. 1 = Measure sample items
2 = Select sample items
3 = Define the population

A) 1, 2, 3.
B) 3, 1, 2.
C) 2, 1, 3.
D) 3, 2, 1.

Question 33

The set of items about which a statement is made in a sampling application is referred to as a(n):

A) Sampling unit.
B) Sample.
C) Population unit.
D) Population.

Question 34

In which of the following situations would the use of sampling be most appropriate?

A) The need for precise information is less important.
B) The number of items comprising the population is smaller.
C) The likelihood of selecting a representative sample is relatively low.
D) The use of sampling would be appropriate in all of the above situations.

Question 35

Why is defining the population so important in a sampling application?

A) To permit the auditor to select the appropriate type of substantive procedure.
B) To ensure that the results appropriately represent the entire population.
C) To reduce sampling risk to the appropriate level.
D) To allow the auditor to appropriately measure sample items.

Question 36

Select the description that best illustrates sampling risk.

A) Applying audit procedures that are inappropriate for the audit objectives.
B) Failing to recognize misstatements or deviations in the documents examined.
C) Arriving at incorrect statistical conclusions due to computational errors.
D) Choosing a sample that has proportionately more errors than the population.

Question 37

Which of the following would typically result in nonsampling risk?

A) Selecting a nonrepresentative sample.
B) Making a mistake in recording sample results.
C) Intentionally omitting several items in the population from examination.
D) None of the above results in nonsampling risk.

Question 38

In which of the following types of sampling applications is the auditor exposed to sampling risk?

A) Statistical sampling, yes; nonstatistical sampling, yes.
B) Statistical sampling, yes; nonstatistical sampling, no.
C) Statistical sampling, no; nonstatistical sampling, yes.
D) Statistical sampling, no; nonstatistical sampling, no.

Question 39

An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps an auditor to

A) Eliminate the risk of nonsampling error.
B) Reduce the level of audit risk and overall materiality to a relatively low level.
C) Measure the sufficiency of the evidence gathered.
D) Minimize the failure to detect misstatements and irregularities.

Question 40

Nonsampling risk can occur in which of the following types of sampling plans:

A) Statistical sampling, yes; nonstatistical sampling, yes.
B) Statistical sampling, yes; nonstatistical sampling, no.
C) Statistical sampling, no; nonstatistical sampling, yes.
D) Statistical sampling, no; nonstatistical sampling, no.

Question 41

The precision interval has a _______________ percent probability of including the ______________.

A) sampling risk, adjusted sample estimate.
B) sampling risk, true population value.
C) 1 minus sampling risk, adjusted sample estimate.
D) 1 minus sampling risk, true population value.

Question 42

Which of the following components of the audit risk model is most closely associated with variables sampling?

A) Audit risk.
B) Risk of material misstatement.
C) Detection risk.
D) Analytical procedures risk.

Question 43

The method of sample selection in which a random starting point is selected and a fixed number of items are bypassed prior to the next item being selected is referred to as

A) Block selection.
B) Haphazard selection.
C) Systematic random selection.
D) Unrestricted random selection.

Question 44

While performing an audit of accounts receivable,R.Allen,CPA,found that the sample results supported the conclusion that the accounts receivable balance was materially misstated.However,the balance was,in fact,not materially misstated.This situation illustrates the risk of

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

Question 45

Which of the following characteristics of substantive procedures is most closely associated with the use of sampling?

A) Extent of substantive procedures.
B) Nature of substantive procedures.
C) Timing of substantive procedures.
D) All of the above are closely associated with the use of sampling.

Question 46

Why is the auditor more concerned with the risk of assessing control risk too low rather than the risk of assessing control risk too high?

A) The risk of assessing control risk too high is not a type of sampling risk.
B) The risk of assessing control risk too low exposes the auditor to an efficiency loss.
C) The risk of assessing control risk too low may result in the auditor's failing to perform sufficient substantive procedures.
D) The risk of assessing control risk too low cannot be measured by the auditor during the sampling process.

Question 47

Which of the following most closely represents an unrestricted random selection procedure?

A) Identifying a starting point within the population and bypassing a fixed number of items.
B) Matching items in the population to a series of randomly selected numbers.
C) Randomly selecting invoices to customers whose last names start with W.
D) Randomly picking items from an accounts receivable file.

Question 48

In performing variables sampling,the auditor will conclude that the account balance is not materially misstated if the _______________ is less than or equal to ______________.

A) upper limit on misstatement, tolerable misstatement.
B) expected error, tolerable misstatement.
C) tolerable misstatement, upper limit on misstatement.
D) tolerable misstatement, expected error.

Question 49

A disadvantage of using a systematic random selection procedure is that

A) This type of procedure does not permit the auditor to measure the exposure to sampling risk.
B) This type of procedure does not make all items available for selection.
C) This type of procedure requires that the population be arranged in a random order.
D) This type of procedure provides the auditor a higher level of exposure to nonsampling risk compared to other selection procedures.

Question 50

In the study of internal control,the auditor uses sampling to compare the ____________ to the _____________.

A) adjusted estimate of misstatement, overall materiality.
B) sampling risk, precision.
C) adjusted estimate of the deviation rate, tolerable rate of deviation.
D) precision interval, upper limit on misstatement.

Question 51

If the upper limit rate of deviation exceeds the tolerable rate of deviation,the auditor would most likely

A) Accept the account balance as fairly stated.
B) Reject the account balance as fairly stated.
C) Increase the planned effectiveness of substantive procedures.
D) Not increase the planned effectiveness of substantive procedures.

Question 52

Which of the following is not a criterion for using a selection method with statistical sampling?

A) The method provides a reasonable likelihood of selecting a representative sample.
B) The method allows the probability of selecting sample items to be determined.
C) The method specifically identifies each item in the population with a number.
D) The method allows the selection process to be replicated.

Question 53

A sample selection method in which items are selected in a nonsystematic manner is referred to as

A) Block selection.
B) Haphazard selection.
C) Systematic random selection.
D) Unrestricted random selection.

Question 54

Which of the following sampling risks is associated with the use of variables sampling?

A) Risk of assessing control risk too high, yes; risk of incorrect rejection, yes.
B) Risk of assessing control risk too high, yes; risk of incorrect rejection, no.
C) Risk of assessing control risk too high, no; risk of incorrect rejection, yes.
D) Risk of assessing control risk too high, no; risk of incorrect rejection, no.

Question 55

The type of sampling most frequently used by the auditors during their substantive procedures is referred to as

A) Account balance sampling.
B) Attributes sampling.
C) Item sampling.
D) Variables sampling.

Question 56

A sample selection method in which a series of contiguous items are selected from the population is referred to as

A) Block selection.
B) Haphazard selection.
C) Systematic random selection.
D) Unrestricted random selection.

Question 57

Which of the following risks exposes the auditor to effectiveness losses?

A) Risk of assessing control risk too high, risk of incorrect acceptance.
B) Risk of assessing control risk too low, risk of incorrect rejection.
C) Risk of assessing control risk too high, risk of incorrect rejection.
D) Risk of assessing control risk too low, risk of incorrect acceptance.

Question 58

Which of the following does not affect the sample size in an attributes sampling application?

A) Expected population deviation rate.
B) Upper limit rate of deviation.
C) Sampling risk.
D) Tolerable rate of deviation.

Question 59

After the auditor has defined the population to be examined,the next step would be to

A) Define the characteristic of interest.
B) Select the sample items.
C) Determine the sample size.
D) Measure the sample items.

Question 60

Which of the following doesnot have a direct relationship with sample size?

A) Expected population deviation rate.
B) Population size.
C) Risk of assessing control risk too low.
D) All of the above have a direct relationship with sample size.

Question 61

Which of the following is an advantage of nonstatistical sampling?

A) It measures the audit team's exposure to sampling risk.
B) It is required by generally accepted auditing standards.
C) It ensures that samples are randomly selected.
D) It is typically less complex than statistical sampling.

Question 62

The risk that the decision made based on the sample will differ from the decision made based on the entire population is referred to as

A) Audit risk.
B) Examination risk.
C) Sampling risk.
D) Nonsampling risk.

Question 63

Which of the following statements is not true if the precision interval for a sampling risk of 10 percent ranges from 60 to 70?

A) A 10 percent probability exists that the true population value is less than 60 or more than 70.
B) A 90 percent probability exists that the true population value is less than 60 or more than 70.
C) The reliability is 90 percent.
D) The precision is 5.

Question 64

Which of the following is not true with respect to the risk of incorrect acceptance?

A) It results in an efficiency loss to the auditor.
B) It occurs when the auditor's sample indicates that the account balance is fairly stated.
C) It occurs when the true misstatement in the account balance exceeds tolerable misstatement.
D) The auditor can measure the exposure to this risk when using statistical sampling applications.

Question 65

Why does the risk of incorrect rejection result in an efficiency loss to the auditor?

A) Additional time is necessary to propose adjustments to the client's account balances.
B) The auditor typically expands the sample to examine additional components or transactions of the account balance.
C) More detailed audit procedures are performed on sample items already examined by the auditor.
D) The auditor typically extends the study of internal control to attempt to obtain a reduction in the level of risk of material misstatement.

Question 66

Selecting a sample using a series of random numbers to identify sample items is referred to as

A) Block selection.
B) Haphazard selection.
C) Systematic random selection.
D) Unrestricted random selection.

Question 67

The distance from the sample estimate that has a certain likelihood (equal to reliability)of including the true population value is known as the

A) Confidence.
B) Mean.
C) Precision.
D) Precision interval.

Question 68

If systematic selection is used with a starting point of 10,a population size of 100,and a necessary sample size of 20,the first three items selected for examination would be

A) 10, 110, 210.
B) 110, 210, 310.
C) 10, 15, 20.
D) 15, 20, 25.

Question 69

Auditors consider statistical sampling to be characterized by the following:

A) Representative sample selection and nonmathematical consideration of the results.
B) Carefully biased sample selection and mathematical calculation of the results.
C) Representative sample selection and mathematical calculation of the results.
D) Carefully biased sample selection and nonmathematical consideration of the results.

Question 70

Which of the following is not a method used by auditors to control their exposure to sampling risk during the examination?

A) Determining an appropriate sample size.
B) Performing the appropriate audit procedure.
C) Ensuring that all items have an equal opportunity to be selected.
D) Evaluating sample results using a mathematical basis.

Question 71

In an audit sampling application,an auditor

A) Performs procedures on all items in a balance and makes a conclusion about the entire balance
B) Performs procedures on less than 100 percent of the items in a balance and formulates a conclusion about the entire balance
C) Performs procedures on less than 100 percent of the items in a class of transactions to become familiar with the client's accounting system.
D) Performs analytical procedures on the client's unaudited financial statements when planning the audit.

Question 72

In audit sampling applications,sampling risk is

A) A characteristic of statistical sampling applications but not of nonstatistical applications.
B) The probability that the audit team will fail to recognize erroneous accounting in the client's documentation.
C) The probability that accounting misstatements will arise in transactions and enter the accounting system.
D) The probability that an audit team's conclusion based on a sample might be different from the conclusion based on an audit of the entire population.

Question 73

Which of the following is appropriately used for statistical sampling applications?

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

Question 74

Which of the following has a direct relationship with sample size in a variables sampling application?

A) Tolerable misstatement, yes; expected error, yes.
B) Tolerable misstatement, yes; expected error, no.
C) Tolerable misstatement, no; expected error, yes.
D) Tolerable misstatement, no; expected error, no.

Question 75

A limitation of systematic random selection is that this method

A) Has a relatively low likelihood of yielding a representative sample.
B) Results in a larger sample size than other selection methods.
C) Can result in bypassing a number of items having similar characteristics.
D) Cannot be used with statistical sampling plans.

Question 76

Which of the following pairs of selection methods could appropriately be used in statistical sampling applications?

A) Unrestricted random selection, block selection.
B) Block selection, haphazard selection.
C) Systematic random selection, haphazard selection.
D) Unrestricted random selection, systematic random selection.

Question 77

In which of the following scenarios would the use of sampling be most appropriate?

A) The population consists of a relatively small number of items.
B) The need for precise information about the population is not important.
C) The decision to be made is relatively critical.
D) The costs associated with an incorrect decision are extremely high.

Question 78

The risks of incorrect acceptance in variables sampling and of assessing control risk too low in attributes sampling both relate to

A) Effectiveness of an audit.
B) Efficiency of an audit.
C) Control risk assessment decisions.
D) Evidence about assertions in financial statements.

Question 79

When the auditor concludes that the account balance is not materially misstated when,in fact,it is materially misstated,the auditor has committed the:

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

Question 80

The likelihood that an identified precision interval contains the true (but unknown)population value is the

A) Confidence.
B) Mean.
C) Precision.
D) Sampling risk.