Question 1

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  True

Question 2

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

There is a direct relationship between the confidence level and sample size.Therefore,one can infer from a large sample size that the auditor would like a higher confidence level.On the other hand,the sample size is inversely related to the tolerable deviation rate.Therefore,the tolerable deviation rate must have been relatively low.The expected population deviation rate and sample size are directly related,so there must be a larger expected population deviation rate.

Question 3

In which of the following cases would the auditor be most likely to conclude that all of the items in an account under consideration should be examined rather than tested on a sample basis?

Accepted Answer

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

Question 4

Define sampling risk and nonsampling risk.

Accepted Answer

The answer of Define sampling risk and nonsampling risk....

Question 5

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 6

For an attributes sampling plan,the tolerable deviation rate is 4%,the computed upper deviation rate is 7%,the sample deviation rate is 3%,and the risk of assessing control risk too low is 5%.Which of the following is true?

Accepted Answer

A)   The auditor must increase control risk because the risk of assessing control risk too low is greater than the tolerable deviation rate.
B)   The auditor is likely to increase control risk because the risk of assessing control risk too low is greater than the tolerable deviation rate.
C)   The auditor must increase control risk because the computed upper deviation rate is greater than the tolerable deviation rate.
D)   The auditor is likely to increase control risk because the computed upper deviation rate is greater than the tolerable deviation rate.

Question 7

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

Accepted Answer

A)   As the population size increases, the sample size should increase proportionately.
B)   Deviations from specific internal control procedures at a given rate ordinarily result in misstatements at a lower rate.
C)   There is an inverse relationship between the expected population deviation rate and the sample size.
D)   In determining tolerable deviation rate, an auditor considers detection risk and the sample size.

Question 8

As a result of tests of controls,an auditor over relied on internal control and decreased substantive testing.This overreliance occurred because the true deviation rate in the population was

Accepted Answer

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

Question 9

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.

Question 10

In attributes sampling,population size has little or no effect on sample size once the population exceeds approximately

Accepted Answer

A)   1,000.
B)   5,000.
C)   100,000.
D)   1,000,000.

Question 11

An underlying feature of random-based selection of items is that each

Accepted Answer

A)   stratum of the accounting population be given equal representation in the sample.
B)   item in the accounting population be randomly ordered.
C)   item in the accounting population should have an opportunity to be selected.
D)   item must be systematically selected using replacement.

Question 12

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 13

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.

Question 14

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

Accepted Answer

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

Question 15

Which of the following combinations guarantees a larger sample size?

Accepted Answer

A)   Decrease the desired confidence level and decrease the tolerable deviation rate.
B)   Increase the desired confidence level and decrease the tolerable deviation rate.
C)   Decrease the desired confidence level and increase the expected deviation rate.
D)   Increase the tolerable deviation rate and increase the expected deviation rate.

Question 16

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 17

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 18

Confidence level is the complement of sampling risk.

Accepted Answer

A) True 
 B)False

Question 19

"Computer assisted audit techniques and big data analysis have steadily reduced the number of situations in which audit sampling is necessary and,in the future,will probably eliminate the need for auditors to rely on sampling." Defend or refute the preceding statement.

Accepted Answer

The answer of "Computer assisted audit techniques and big data...

Question 20

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

Accepted Answer

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

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