Question 1

The likelihood of assessing control risk too high is the risk that the sample selected to test controls

Accepted Answer

A)   Does not support the auditor's planned assessed level of control risk when the true operating effectiveness of internal control justifies such an assessment.
B)   Contains misstatements that could be material to the financial statements when aggregated with misstatements in other account balances or transactions classes.
C)   Contains proportionately fewer deviations from prescribed internal controls than exist in the balance or class as a whole.
D)   Does not support the tolerable misstatement for some or all of management's assertions. A

Question 2

Audit sampling is commonly used to gather scanning audit evidence.

Accepted Answer

A) True 
 B)False  False

Question 3

Statistical sampling provides a technique for

Accepted Answer

A)   Exactly defining materiality.
B)   Greatly reducing the amount of substantive testing.
C)   Eliminating judgment in testing.
D)   Measuring the sufficiency of evidential matter. D

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

In addition to evaluating the frequency of deviations in tests of controls,an auditor should also consider certain qualitative aspects of the deviations.The auditor most likely would give broader consideration to the implications of a deviation if it was

Accepted Answer

A)   The only deviation discovered in the sample.
B)   Identical to a deviation discovered during the prior year's audit.
C)   Caused by an employee's oversight.
D)   Initially concealed by a forged document.

Question 6

An auditor plans to examine a sample of 20 checks for countersignatures as prescribed by the client's internal control procedures.One of the checks in the chosen sample of 20 cannot be found.The auditor should consider the reasons for this limitation and

Accepted Answer

A)   Evaluate the results as if the sample size had been 19.
B)   Treat the missing check as a deviation for the purpose of evaluating the sample.
C)   Treat the missing check in the same manner as the majority of the other 19 checks (i.e., countersigned or not) .
D)   Choose another check to replace the missing check in the sample.

Question 7

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 8

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 9

Your uncle Bob,a CPA,has recently started auditing and he wants your advice on some tests of sales transactions he is conducting.Bob selected a haphazard sample of 15 sales with a total book value of $75,000.In his sample,he found a total of $500 in net overstatement errors.The total sales balance per book is $10,000,000.Overall materiality for the engagement is $300,000.Tolerable misstatement for sales is $70,000.If the sample results indicate that Bob's best estimate of total misstatement in sales is $35,000,can Bob safely conclude that no additional work is needed in this area?
 Include in your answer a clear discussion of how sample results are compared to tolerable misstatement.

Accepted Answer

The answer of Your uncle Bob,a CPA,has recently started auditing...

Question 10

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 client's controls?

Accepted Answer

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

Question 11

Auditors who prefer statistical sampling to nonstatistical sampling may do so because statistical sampling helps the auditor

Accepted Answer

A)   Measure the sufficiency of the evidential matter obtained.
B)   Eliminate subjectivity in the evaluation of sampling results.
C)   Reduce the level of tolerable misstatement to a relatively low amount.
D)   Minimize the failure to detect a material misstatement due to nonsampling risk.

Question 12

An auditor who uses statistical sampling for attributes in testing internal controls is most likely to reduce the planned reliance on a prescribed control when the

Accepted Answer

A)   Sample deviation rate plus the allowance for sampling risk equals the tolerable deviation rate.
B)   Sample deviation rate is less than the expected population deviation rate used in planning the sample.
C)   Tolerable deviation rate less the allowance for sampling risk exceeds the sample deviation rate.
D)   Sample deviation rate plus the allowance for sampling risk exceeds the tolerable deviation rate.

Question 13

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 14

Audit sampling is commonly used to gather confirmation audit evidence.

Accepted Answer

A) True 
 B)False

Question 15

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.

Question 16

With a nonstatistical sampling application,the auditor relies on professional judgment rather than the laws of probability to reach a conclusion about the audit test.

Accepted Answer

A) True 
 B)False

Question 17

A Type II error is the risk of incorrect acceptance.

Accepted Answer

A) True 
 B)False

Question 18

The risk of incorrect acceptance relates to the

Accepted Answer

A)   Effectiveness of the audit.
B)   Efficiency of the audit.
C)   Preliminary estimates of materiality levels.
D)   Tolerable misstatement.

Question 19

Auditing standards permit both statistical and nonstatistical methods of audit sampling.

Accepted Answer

A) True 
 B)False

Question 20

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 for...

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

The likelihood of assessing control risk too high is the risk that the sample selected to test controls

Audit sampling is commonly used to gather scanning audit evidence.

Statistical sampling provides a technique for

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

In addition to evaluating the frequency of deviations in tests of controls,an auditor should also consider certain qualitative aspects of the deviations.The auditor most likely would give broader consideration to the implications of a deviation if it was

An auditor plans to examine a sample of 20 checks for countersignatures as prescribed by the client's internal control procedures.One of the checks in the chosen sample of 20 cannot be found.The auditor should consider the reasons for this limitation and

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?

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 client's controls?

Auditors who prefer statistical sampling to nonstatistical sampling may do so because statistical sampling helps the auditor

An auditor who uses statistical sampling for attributes in testing internal controls is most likely to reduce the planned reliance on a prescribed control when the

The computed upper deviation rate is

Audit sampling is commonly used to gather confirmation audit evidence.

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

With a nonstatistical sampling application,the auditor relies on professional judgment rather than the laws of probability to reach a conclusion about the audit test.

A Type II error is the risk of incorrect acceptance.

The risk of incorrect acceptance relates to the

Auditing standards permit both statistical and nonstatistical methods of audit sampling.

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?