Question 1

Which component of the expanded audit risk model is most closely associated with the risk of incorrect acceptance?

Accepted Answer

A)  Analytical procedures risk. 
B)  Risk of material misstatement. 
C)  Nonsampling risk. 
D)  Test of details risk.

Question 2

P.Roberts,CPA,decided to use monetary unit sampling (MUS)in the audit of a client's accounts receivable balance.The recorded amount of the accounts receivable control account totaled $2,000,000 and consisted of approximately 5,000 accounts.Roberts established a tolerable misstatement of $100,000,a risk of incorrect acceptance of 5 percent,and an expected error of $10,000.
a.Calculate the sample size.
b.Calculate the sampling interval.

Accepted Answer

The answer of P.Roberts,CPA,decided to use monetary unit sampling (MUS)in...

Question 3

The "adjustment" to the projected misstatement that controls the auditor's exposure to sampling risk is referred to as the _________________________________________.

Accepted Answer

The answer of The "adjustment" to the projected misstatement that...

Question 4

The _______________________________ consists of three components: projected misstatement,incremental allowance for sampling risk,and basic allowance for sampling risk.

Accepted Answer

The answer of The _______________________________ consists of three components: projected...

Question 5

Under MUS sampling,the sampling interval is determined by dividing the _______________________ by the ______________________.

Accepted Answer

A)  sample size, population size 
B)  population size, sample size 
C)  tolerable misstatement, population size 
D)  population size, tolerable misstatement

Question 6

Which of the following steps involved with determining the upper limit on misstatements is ordinarily performed earliest?

Accepted Answer

A)  Multiply the sampling interval by the tainting percentage. 
B)  Determine the audited amount of the item and compare it to the recorded amount. 
C)  Calculate the basic allowance for sampling risk. 
D)  Calculate the incremental allowance for sampling risk.

Question 7

Classical variables sampling methods are unique in that they define the population as a number of dollars in an account balance or class of transactions.

Accepted Answer

A) True 
 B)False

Question 8

In which of the following situations would the use of classical variables sampling (as opposed to monetary unit sampling)be most appropriate?

Accepted Answer

A)  When a larger number of misstatements are anticipated. 
B)  When overstatement errors (as opposed to understatement errors) are of more importance. 
C)  When individual components and account balances are higher in comparison to the tolerable misstatement established by the auditor. 
D)  When the auditor wishes to begin sampling during the interim period.

Question 9

To determine the sample size for a classical variables sampling application,an audit team should consider the tolerable misstatement,risk of incorrect acceptance,risk of incorrect rejection,population size,population variability,and

Accepted Answer

A)  Expected misstatement in the account. 
B)  Overall materiality for the financial statements taken as a whole. 
C)  Risk of assessing control risk too low. 
D)  Risk of assessing control risk too high.

Question 10

D.Pujols,CPA,performed a nonstatistical sampling plan to examine the inventory balances of Wieserbud Brewing,Inc.Pujols audited 120 items from a sample and found an audited value of $24,600.The sample had a recorded value of $30,000.If the entire inventory contained 2,400 items and the total recorded value of the inventory was $480,000,the estimated account balance using nonstatistical methods is

Accepted Answer

A)  $393,600. 
B)  $474,500. 
C)  $480,000. 
D)  $500,000.

Question 11

G.Summitt,CPA,performed a nonstatistical sampling plan to examine the inventory balances of Hero,Inc.Which of the following methods of sample selection are available to Summitt?

Accepted Answer

A)  Random and systematic only. 
B)  Block and haphazard only. 
C)  Any method Summitt believes will result in a representative sample. 
D)  Any method where the results can be probabilistically estimated.

Question 12

W.Blue,CPA,performed a nonstatistical sampling plan to examine the inventory balances of XYZ,Inc.The CPA audited 60 items from a sample and found an audited value of $12,300.The sample had a recorded value of $15,000.If the entire inventory contained 1,200 items and the total recorded value of the inventory was $240,000,the estimated account balance using nonstatistical methods is

Accepted Answer

A)  $196,800. 
B)  $237,250. 
C)  $240,000. 
D)  $250,000.

Question 13

A significant advantage of monetary unit sampling (MUS)is that it typically results in relatively small sample sizes.

Accepted Answer

A) True 
 B)False

Question 14

Both the expected error and tolerable misstatement have direct relationships with sample size.

Accepted Answer

A) True 
 B)False

Question 15

V.Solo,CPA,performed a nonstatistical sampling plan to examine the inventory balances of Hope,Inc.In selecting the sample of 70 items,Solo used an expected misstatement of $40,000 and a tolerable misstatement of $65,000.The account balance consisted of 1,050 items totaling $1,200,000.The sample's recorded value was $80,000,and the audited value was $76,000.What conclusion did Solo draw regarding the account balance?

Accepted Answer

A)  To accept it because the estimated misstatement is less than the tolerable misstatement. 
B)  To reject it because the estimated misstatement is more than the expected misstatement. 
C)  To accept because the estimated misstatement is less than the expected misstatement. 
D)  To reject because the estimated misstatement is more than the tolerable misstatement.

Question 16

Which of the following is not an advantage associated with monetary unit sampling (MUS)?

Accepted Answer

A)  Its methods typically include transactions or components reflecting relatively large dollar amounts. 
B)  Its methods are more effective in identifying overstatement errors. 
C)  Its methods provide a conservative (higher) estimate of misstatement in the account balance or class of transactions. 
D)  Its methods typically result in relatively small sample sizes.

Question 17

If the upper limit on misstatement is less than or equal to the tolerable misstatement,the auditor would conclude that the account balance or class of transactions is fairly recorded.

Accepted Answer

A) True 
 B)False

Question 18

Variables sampling methods can be used to estimate

Accepted Answer

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

Question 19

When performing substantive procedures,auditors run the sampling risk(s)of

Accepted Answer

A)  Assessing control risk too high or too low. 
B)  Incorrect acceptance and incorrect rejection. 
C)  Assessing control risk too low only. 
D)  Incorrect acceptance only.

Question 20

In a classical variables sampling application,the precision interval has a (1 minus the risk of incorrect acceptance)probability of including the true population value.

Accepted Answer

A) True 
 B)False

Exam 19: Variables Sampling

Which component of the expanded audit risk model is most closely associated with the risk of incorrect acceptance?

The "adjustment" to the projected misstatement that controls the auditor's exposure to sampling risk is referred to as the _________________________________________.

The _______________________________ consists of three components: projected misstatement,incremental allowance for sampling risk,and basic allowance for sampling risk.

Under MUS sampling,the sampling interval is determined by dividing the _ by the .

Which of the following steps involved with determining the upper limit on misstatements is ordinarily performed earliest?

Classical variables sampling methods are unique in that they define the population as a number of dollars in an account balance or class of transactions.

In which of the following situations would the use of classical variables sampling (as opposed to monetary unit sampling) be most appropriate?

To determine the sample size for a classical variables sampling application,an audit team should consider the tolerable misstatement,risk of incorrect acceptance,risk of incorrect rejection,population size,population variability,and

G.Summitt,CPA,performed a nonstatistical sampling plan to examine the inventory balances of Hero,Inc.Which of the following methods of sample selection are available to Summitt?

A significant advantage of monetary unit sampling (MUS)is that it typically results in relatively small sample sizes.

Both the expected error and tolerable misstatement have direct relationships with sample size.

Which of the following is not an advantage associated with monetary unit sampling (MUS) ?

If the upper limit on misstatement is less than or equal to the tolerable misstatement,the auditor would conclude that the account balance or class of transactions is fairly recorded.

Variables sampling methods can be used to estimate

When performing substantive procedures,auditors run the sampling risk(s) of

In a classical variables sampling application,the precision interval has a (1 minus the risk of incorrect acceptance)probability of including the true population value.