Question 1

Which of the following statements is generally correct about the sample size in statistical sampling when testing internal controls?

Accepted Answer

A)  As the population size doubles, the sample size should increase by about 67%. 
B)  The sample size is inversely proportional to the expected population deviation rate. 
C)  There is no relationship between the tolerable rate of deviation and the sample size. 
D)  When evaluation very large populations, the population size has little or no effect on the sample size.

Question 2

While selecting a sample of sales invoices for a test of internal controls,the auditor was unable to locate one invoice and classified this invoice as non-deviation.This is an example of

Accepted Answer

A)  sampling risk. 
B)  incorrect acceptance. 
C)  nonsampling risk. 
D)  deviation risk.

Question 3

Which of the following is the most likely outcome when the upper limit rate of deviation is less than the tolerable rate of deviation?

Accepted Answer

A)  The auditor would be exposed to the risk of overreliance. 
B)  The auditor would decide to reduce the planned degree of reliance on internal control. 
C)  The auditor would increase the extent of further audit procedures. 
D)  The auditor would be exposed to a potential efficiency loss.

Question 4

As part of the assessment of control risk,the auditor decided to use audit sampling.After specifying the audit objectives,what would the auditor most likely do next?

Accepted Answer

A)  Determine the sample size. 
B)  Select the sample. 
C)  Perform tests of control procedures. 
D)  Define the deviation conditions.

Question 5

A sampling plan in which an initial sample is selected and the audit team either draws a final conclusion or selects additional items before drawing a final conclusion is called

Accepted Answer

A)  attributes sampling. 
B)  discovery sampling. 
C)  sequential sampling. 
D)  statistical sampling.

Question 6

Nonsampling risk normally occurs during which step of the sampling process?

Accepted Answer

A)  Defining the population 
B)  Selecting sample items 
C)  Measuring sample items 
D)  Evaluating sample results

Question 7

The maximum rate of deviation that may exist in the operation of a control policy or procedure before the auditors would reduce reliance on internal control is referred to as

Accepted Answer

A)  acceptable rate of deviation. 
B)  control risk. 
C)  tolerable rate of deviation. 
D)  upper limit rate of deviation.

Question 8

Which of the following is not a judgment or estimate auditors must make when performing attributes sampling?

Accepted Answer

A)  Tolerable rate of deviation 
B)  Expected population deviation rate 
C)  Sample rate of deviation 
D)  Risk of overreliance

Question 9

Assume that the audit team wishes to determine the extent to which a particular control policy was functioning as intended.Identifying applications of the control throughout the period under audit would be most closely related to which of the following steps in sampling?

Accepted Answer

A)  Determining the objective of sampling 
B)  Defining the characteristic of interest 
C)  Defining the population 
D)  Determining the sample size

Question 10

In performing attributes sampling,the auditor will conclude that the control is functioning as intended if the ______ is less than or equal to ______.

Accepted Answer

A)  expected population deviation rate; tolerable rate of deviation 
B)  upper limit rate of deviation; tolerable rate of deviation 
C)  tolerable rate of deviation; expected population deviation rate 
D)  tolerable rate of deviation; upper limit rate of deviation

Question 11

Which of the following statements is true regarding attributes sampling?

Accepted Answer

A)  Once the population reaches a certain size, population size has a limited impact on sample size. 
B)  Auditors should use attributes sampling to evaluate controls, regardless of the degree of reliance being placed upon the controls. 
C)  When determining the appropriate sample size, the audit team will specifically control its exposure to both the risk of overreliance and the risk of underreliance. 
D)  Tests of controls should only be applied to transactions occurring at the end of the year under audit because the audit team wants to reach a conclusion about control risk at year end.

Question 12

In determining the number of documents to select for a test to obtain assurance that all sales returns have been properly authorized,an auditor should consider the tolerable rate of deviation from the control activity.The auditor should also consider 1.Likely rate of deviations
2)Allowable risk of underreliance.

Accepted Answer

A)  1 only 
B)  2 only 
C)  Both 1 and 2 
D)  Either 1 or 2

Question 13

To determine the appropriate sample size for an attributes sampling application,Williams,CPA,defined the population to be 25,000 sales invoices.Williams then assessed the risk of overreliance to be 10%,the tolerable rate of deviation to be 4%,and the expected population deviation rate to be 2.5%.Using the AICPA Sample Size tables,the appropriate sample size would be

Accepted Answer

A)  9. 
B)  13. 
C)  353. 
D)  513.

Question 14

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

Accepted Answer

A)  Inspecting purchase orders for proper approval by supervisors 
B)  Making an independent estimate of recorded payroll expense 
C)  Determining that all payables are recorded at year end 
D)  Selecting accounts receivable for confirmation of account balances

Question 15

Which of the following statements is correct concerning statistical sampling in tests of controls?

Accepted Answer

A)  Deviations from control procedures at a given rate usually result in misstatements at a higher rate. 
B)  As the population size doubles, the sample size should also double. 
C)  The qualitative aspects of deviations are not considered by the auditor. 
D)  There is an inverse relationship between the sample size and the tolerable rate of deviation.

Question 16

Indicate how each of the following conditions affect sample size by using the letters I (increase),D (decrease),or N (no effect).For each condition,hold all other factors constant.
____ 1.An increase in the expected population deviation rate from 2% to 5%.
____ 2.A decrease in the population from 10,000 controls to 5,000 controls.
____ 3.An increase in the tolerable rate of deviation from 3% to 10%.
____ 4.An increase in the risk of underreliance from 5% to 10%.
____ 5.A decrease in the risk of overreliance from 5% to 1%.

Accepted Answer

The answer of Indicate how each of the following conditions...

Question 17

What is the general order in which the following steps in attributes sampling are performed? 1 = Define the population
2 = Determine the objective of sampling
3 = Determine the sample size
4 = Select the sample

Accepted Answer

A)  1, 2, 3, 4 
B)  2, 1, 3, 4 
C)  1, 2, 4, 3 
D)  2, 1, 4, 3

Question 18

When the auditor concludes that a control is functioning properly when,in fact,it is not,the auditor has committed the

Accepted Answer

A)  risk of underreliance. 
B)  risk of overreliance. 
C)  risk of incorrect acceptance. 
D)  risk of incorrect rejection.

Question 19

When examining the client's internal control,what is the relationship of each of the following with sample size?

Accepted Answer

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

Question 20

An auditor wanted to test credit approval on 10,000 sales invoices processed during the year.The auditor designed a statistical sample that would provide a 1% risk of overreliance (99% confidence)that not more than 7% of the sales invoices lacked approval.The auditor estimated from previous experience that about 2.5% of the sales invoices lacked approval.A sample of 200 invoices was examined and 7 of them were lacking approval.The auditor then determined the upper limit rate of deviation to be 8%. In evaluating this sample,the auditor decided to increase the level of the preliminary assessment of control risk because the

Accepted Answer

A)  tolerable rate of deviation (7%) was less than the upper limit rate of deviation (8%). 
B)  expected population deviation rate (7%) was more than the percentage of errors in the sample (3.5%). 
C)  expected population deviation rate (2.5%) was less than the tolerable rate of deviation. 
D)  upper limit rate of deviation (8%) was more than the percentage of errors in the sample (3.5%).

Exam 18: Attributes Sampling