Question 1

Why is the auditor more concerned with the risk of overreliance rather than the risk of underreliance?

Accepted Answer

A) The risk of underreliance is not a type of sampling risk. 
B) The risk of overreliance exposes the auditor to an efficiency loss. 
C) The risk of overreliance may result in the auditor failing to perform sufficient substantive procedures. 
D) The risk of overreliance cannot be measured by the auditor during the sampling process.

Question 2

Based on the results of attributes sampling,the audit team assessed control risk too low and did not modify the nature,timing,and extent of its further audit procedures to reduce detection risk.This situation would most likely result in a(n):

Accepted Answer

A) Higher level of audit risk than planned. 
B) Lower level of inherent risk. 
C) Greater efficiency loss. 
D) Lower effectiveness loss.

Question 3

Documentation is required during which of the following stages of the sampling process? $$\begin{array} { c c c } 
& \text { Measuring Sample } & \text { Avalueting Sample } \
&\text { Items } & \text { Results } \
A. &\text { Yes } & \text { No } \
B.&\text {  No } & \text { No }  \
C.&\text {  No } & \text { Yes }  \
D. &\text { Yes } & \text { Yes }
\end{array}$$

Accepted Answer

The answer of Documentation is required during which of the...

Question 4

In which of the following circumstances would the auditor most likely use variables sampling?

Accepted Answer

A) Identifying the susceptibility of the account balance to misstatement. 
B) Evaluating the operating effectiveness of specific control procedures. 
C) Evaluating the operating design of specific control procedures. 
D) Determining whether the client's accounts receivable balance is correctly recorded.

Question 5

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 6

Which of the following situations is true with respect to sampling?

Accepted Answer

A) Sampling results in a tradeoff of efficiency for greater effectiveness. 
B) Sampling is most useful when the need for exact information is very important. 
C) A well-designed sample can appropriately limit the exposure to nonsampling risk. 
D) Sampling is more appropriate when the number of items comprising the population is relatively large.

Question 7

For each of the following statements,indicate whether it is more closely related to attributes sampling or variables sampling by using the letter A (attributes)and V (variables).
1___.Used to allow the auditor to assess risk of material misstatement.
2___.Sampling risks include the risk of incorrect acceptance and risk of incorrect rejection.
3___.The population variability affects the sample size.
4___.The auditor's sample would include transactions or components comprising the account balance.
5___.Sampling risks include the risk of underreliance and the risk of overreliance.
6___.The auditor's sample would include potential applications of control policies and procedures.
7___.This type of sampling is influenced by the auditor's acceptable level of detection risk.

Accepted Answer

The answer of For each of the following statements,indicate whether...

Question 8

While performing an audit of accounts payable,Clayton,CPA,is using variables sampling to determine the audited value of the account based on selected purchase orders.Which of the following options is most likely to reduce the necessary sample size?

Accepted Answer

A) A decrease in the level of tolerable misstatement. 
B) An increase in the expected level of misstatement. 
C) An increase in the variability of the size of accounts payable transactions. 
D) An increase in the necessary risk of incorrect acceptance.

Question 9

An auditor is determining the appropriate sample size for a variables sampling application.Compared to prior engagements,the auditor concludes that the population variability has increased.In addition,the partner on the engagement is requiring lower levels of the risk of incorrect acceptance than those used in previous audits.What effect will these changes have on the auditor's determination of sample size?

Accepted Answer

A) Both of these changes will decrease sample size. 
B) The increase in population variability will increase sample size; reducing sampling risk will have no effect on sample size. 
C) The increase in population variability will increase sample size; reducing sampling risk will decrease sample size. 
D) Both of these changes will increase sample size.

Question 10

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

Accepted Answer

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 11

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

Accepted Answer

A) Statistical sampling provides auditors with a sufficient sample size that controls exposure to sampling risk. 
B) Statistical sampling uses selection methods that expose all items in the population to selection. 
C) Statistical sampling evaluates the sample evidence in such a manner that controls exposure to sampling risk. 
D) Statistical sampling deploys audit procedures that all auditors to more effectively evaluate evidence.

Question 12

All of the following are correct regarding variables sampling,except:

Accepted Answer

A) Variables sampling is used to examine a population when auditors want to estimate the amount (or value)of some characteristic of that population. 
B) The risk of incorrect rejection is of more concern to auditors than the risk of incorrect acceptance. 
C) Auditors can use either statistical or nonstatistical sampling approaches to variables sampling. 
D) To determine if an account balance is fairly stated,auditors compare the adjusted sample estimate of the misstatement to the tolerable misstatement.

Question 13

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

Accepted Answer

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

Question 14

Below is a listing of major steps in the sampling process.Indicate,using the correct letter,the phase in which each step belongs.Each phase may be associated with more than one step.
A.Planning.
B.Performing.
C.Evaluating.1___.Determine the sample size.2___.Determine the objective of sampling.3___.Evaluate the sample results.4___.Define the population.5___.Measure sample items.6___.Select sample items.7___.Define the characteristic of interest.

Accepted Answer

The answer of Below is a listing of major steps...

Question 15

Haley, CPA, selected all invoices prepared on five different days throughout the year.

Accepted Answer

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

Question 16

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 17

When examining the client's internal control,what is the relationship of each of the following with sample size? $$\begin{array} { c c c } 
& \text { Brpected refe of deviation } & \text { Rist of } \
&&\text { averrehiavee } \
\text { A. } & \text { Direct } & \text { Direct } \
\text { B. } & \text { Direct } & \text { Inverse } \
\text { C. } & \text { Inverse } & \text { Inverse } \
\text { D. } & \text { Invere } & \text { Direat }
\end{array}$$

Accepted Answer

The answer of When examining the client's internal control,what is...

Question 18

For each of the following situations related to determining the average weight of a National Football League player,indicate how the appropriate sample size would change by using the letter I (increase),D (decrease),or N (no change).Assume that all other factors are held constant.
1___.The desired level of precision changes from 20 pounds to 10 pounds.
2___.The sampling risk increases from 5 percent to 10 percent.
3___.The number of football players in the population increases from 1,400 to 1,600.
4___.You initially want to estimate the weight for offensive linemen only but decide to include quarterbacks,running banks,and placekickers.
5___.Your initial sample estimate changes from 250 pounds to 230 pounds.

Accepted Answer

The answer of For each of the following situations related...

Question 19

Below are definitions of terms related to audit sampling.Indicate,using the correct letter,which term is most closely associated with the definition.Each term is associated with only one definition.
A.Sampling interval.
B.Precision.
C.Reliability
D.Precision interval.1___.The numeric distance from the estimated population value in which the true (but unknown)population value may lie with a given probability.2___.An interval that has a certain likelihood (equal to reliability)of including the true population value.3___.The number of items in the population divided by the sample size.4___.The likelihood of achieving a given level of precision.

Accepted Answer

The answer of Below are definitions of terms related to...

Question 20

Which of the following is not correct with respect to sample size?

Accepted Answer

A) In a statistical sampling application,the determination of sample size is used to control the auditor's exposure to sampling risk. 
B) As the desired level of sampling risk decreases,the necessary sample size decreases. 
C) Auditors determine sample size after defining the characteristic of interest and the population of interest. 
D) As the expected misstatement (or expected rate of deviation)increases,the necessary sample size increases.

Exam 17: Overview of Sampling