Question 1

A control is deemed to be more important than thought at the time that attributes sampling parameters were set. The auditor is most likely to respond by:

Accepted Answer

A)  decreasing the risk of assessing control risk too high.
B)  increasing population size.
C)  decreasing the tolerable deviation rate.
D)  decreasing the expected deviation rate. C

Question 2

To determine the sample size for a test of controls, an auditor should consider the tolerable deviation rate, the desired confidence level, and the:

Accepted Answer

A)  expected population deviation rate.
B)  computed upper precision limit.
C)  risk of assessing control risk too high.
D)  risk of incorrect rejection. A

Question 3

Indicate which of the following audit procedures, used as tests of controls, do not involve audit sampling.
1. Observing and evaluating segregation of duties.
2. Testing of whether sales invoices are supported by authorized customer orders and shipping documents.
3. Reviewing entity's procedures for accounting for the numerical sequence of shipping documents.
4. Examining sales orders for proper credit approval.
5. Recomputing the information on copies of sales invoices.
6. Comparing the average days outstanding in accounts receivable with industry averages.

Accepted Answer

1. Does not involve sampling.
2. Involves sampling.
3. Does not involve sampling.
4. Involves sampling.
5. Involves sampling.
6. Does not involve sampling.

Question 4

Which of the following factors does an auditor generally need to consider in planning a particular audit sample for a test of controls?

Accepted Answer

A)  Number of items in the population.
B)  Total dollar amount of the items to be sampled.
C)  Desired confidence level.
D)  Risk of assessing control risk too high.

Question 5

A Type I error is the risk of incorrect acceptance.

Accepted Answer

A) True 
 B)False

Question 6

For which of the following audit tests would an auditor most likely use attributes sampling?

Accepted Answer

A)  Making an independent estimate of the amount of LIFO inventory.
B)  Examining invoices in support of the valuation of fixed asset additions.
C)  Selecting accounts receivable balances for confirmation.
D)  Inspecting employee time cards for proper approval by supervisors.

Question 7

Confidence level and sampling risk are related to sample size.

Accepted Answer

A) True 
 B)False

Question 8

As a result of tests of controls, an auditor incorrectly assessed control risk too low and decreased substantive testing. This assessment occurred because the true deviation rate in the population was:

Accepted Answer

A)  more than the risk of assessing control risk too low based on the auditor's sample.
B)  more than the deviation rate in the auditor's sample.
C)  less than the risk of assessing control risk too low based on the auditor's sample.
D)  less than the deviation rate in the auditor's sample.

Question 9

The larger the sample, the lower the confidence level and the lower the sampling risk.

Accepted Answer

A) True 
 B)False

Question 10

The computed upper deviation rate is:

Accepted Answer

A)  the maximum rate of deviations that the auditor is willing to accept before deciding not to rely on the control.
B)  the rate of deviations that the auditor expects to occur in the population.
C)  a point estimate of the population deviation rate.
D)  the sum of the sample deviation rate and an appropriate allowance for sampling risk.

Question 11

For a large population of cash disbursement transactions, Smith, CPA is testing controls by using attribute sampling techniques. Anticipating an expected deviation rate of 3 percent, Smith found from a table that the required sample size is 400 with a tolerable deviation rate of 5 percent and a desired confidence level of 95 percent. If Smith anticipated an expected deviation rate of only 2 percent but wanted to maintain the same tolerable deviation rate and confidence level, the sample size would be closest to:

Accepted Answer

A)  200.
B)  400.
C)  533.
D)  800.

Question 12

When determining the sample size of accounts receivable to test, what are three factors that are important for you to consider?

Accepted Answer

The answer of When determining the sample size of accounts...

Question 13

Audit sampling is commonly used for which type of audit evidence?

Accepted Answer

A)  Reperformance.
B)  Analytical procedures.
C)  Inquiry.
D)  Observation.

Question 14

Before performing sampling procedures in an audit of controls, Sue set the tolerable deviation rate at 4.0%. After the procedures, she computes a computed upper deviation rate of 5.4%. What can Sue conclude about the entity's controls?

Accepted Answer

The answer of Before performing sampling procedures in an audit...

Question 15

For attributes sampling, of the three factors that enter into sample size determination, which two factors can the auditor adjust to reflect the importance of the control?

Accepted Answer

A)  Tolerable deviation rate and confidence level.
B)  Expected deviation rate and confidence level.
C)  Population size and tolerable deviation rate.
D)  Tolerable deviation rate and expected deviation rate.

Question 16

For a particular audit, the sample size for testing controls over the revenue cycle is relatively large. What can you infer about the desired confidence level, the tolerable deviation rate, and the expected population deviation rate?

Accepted Answer

The answer of For a particular audit, the sample size...

Question 17

Jones, CPA, believes the industry-wide deviation rate of client billing errors is 3% and has established a tolerable deviation rate of 5%. In the review of client invoices, Jones should use

Accepted Answer

A)  discovery sampling.
B)  attributes sampling.
C)  stratified sampling.
D)  variables sampling.

Question 18

Which of the following risks is related to efficiency of testing?

Accepted Answer

A)  The risk of incorrect rejection.
B)  Inherent risk.
C)  The risk of incorrect acceptance.
D)  None of these.

Question 19

Audit sampling is commonly used to gather confirmation audit evidence.

Accepted Answer

A) True 
 B)False

Question 20

In which of the following cases would the auditor determine that statistical sampling should not be performed?

Accepted Answer

A)  Tolerable deviation is large and expected population deviation is low.
B)  Tolerable deviation is small and expected population deviation is high.
C)  Tolerable deviation is large and expected population deviation is high.
D)  Tolerable deviation is small and expected population deviation is low.

Exam 8: Audit Sampling: An Overview and Application to Tests of Controls

A control is deemed to be more important than thought at the time that attributes sampling parameters were set. The auditor is most likely to respond by:

To determine the sample size for a test of controls, an auditor should consider the tolerable deviation rate, the desired confidence level, and the:

Which of the following factors does an auditor generally need to consider in planning a particular audit sample for a test of controls?

A Type I error is the risk of incorrect acceptance.

For which of the following audit tests would an auditor most likely use attributes sampling?

Confidence level and sampling risk are related to sample size.

As a result of tests of controls, an auditor incorrectly assessed control risk too low and decreased substantive testing. This assessment occurred because the true deviation rate in the population was:

The larger the sample, the lower the confidence level and the lower the sampling risk.

The computed upper deviation rate is:

When determining the sample size of accounts receivable to test, what are three factors that are important for you to consider?

Audit sampling is commonly used for which type of audit evidence?

Before performing sampling procedures in an audit of controls, Sue set the tolerable deviation rate at 4.0%. After the procedures, she computes a computed upper deviation rate of 5.4%. What can Sue conclude about the entity's controls?

For attributes sampling, of the three factors that enter into sample size determination, which two factors can the auditor adjust to reflect the importance of the control?

For a particular audit, the sample size for testing controls over the revenue cycle is relatively large. What can you infer about the desired confidence level, the tolerable deviation rate, and the expected population deviation rate?

Jones, CPA, believes the industry-wide deviation rate of client billing errors is 3% and has established a tolerable deviation rate of 5%. In the review of client invoices, Jones should use

Which of the following risks is related to efficiency of testing?

Audit sampling is commonly used to gather confirmation audit evidence.

In which of the following cases would the auditor determine that statistical sampling should not be performed?