Question 1

Which of the following is a factor that influences the sample size when testing controls?

Accepted Answer

A) an increase in the tolerable rate of deviation 
B) stratification of the population when appropriate 
C) an increase in the auditor's assessment of the risk of material misstatement 
D) an increase in tolerable misstatement

Question 2

Non statistical sampling is easier to use than statistical sampling as it

Accepted Answer

A) is lower in cost 
B) allows the auditor to select a sample they believe is appropriate 
C) requires less staff training 
D) all of the above

Question 3

When conducting detailed substantive procedures,auditors search for evidence that:

Accepted Answer

A) all transactions have been recorded in the accounts 
B) no fraud has occurred during the year 
C) the client's internal control system is operating effectively 
D) they have remained independent of their clients

Question 4

The permanent file includes detailed descriptions of evidence gathered for a particular year's audit.

Accepted Answer

A) True 
 B)False

Question 5

An audit working paper generally includes:

Accepted Answer

A) cross-referencing between working papers 
B) a file reference 
C) the client's name 
D) all of the above

Question 6

The permanent file includes client information and documentation that apply to more than one audit.

Accepted Answer

A) True 
 B)False

Question 7

When control risk is high the audit strategy is to:

Accepted Answer

A) assume the client's management is dishonest and immediately report them to ASIC 
B) increase reliance on tests of controls and reduce reliance on substantive testing of transactions and account balances. 
C) do little or no tests of controls and increase reliance on substantive testing of transactions and account balances 
D) refuse to continue with the remainder of the audit due to the high risk of fraud

Question 8

When conducting substantive testing,an increase in the auditor's assessment of the risk of material misstatement will result in an increase in the size of the sample.

Accepted Answer

A) True 
 B)False

Question 9

Control risk is the risk that:

Accepted Answer

A) an auditor's substantive procedures will not detect material misstatements 
B) a client's system of internal controls will not prevent or detect a material misstatement 
C) an auditor expresses an inappropriate audit opinion when a financial report is materially misstated 
D) none of the above

Question 10

Stratification of the population will result in less efficient sampling and increase the sample size required.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following would not be included in an auditor's permanent file?

Accepted Answer

A) Copies of long-term contracts 
B) Copies of debtors' confirmation letters 
C) The client's organisational chart 
D) Prior years' audit reports

Question 12

Sampling is required when an audit procedure is tested on an entire group of transactions or all items within an account balance.

Accepted Answer

A) True 
 B)False

Question 13

Sampling is not required when:

Accepted Answer

A) the auditor is conducting tests of controls 
B) an audit procedure is conducted on an entire group of transactions 
C) it is the first year that the auditor has done the audit for a client 
D) the client requests the auditor not to collect samples of certain transactions

Question 14

Which sampling method involves the selection of items that are grouped together within the population of items available?

Accepted Answer

A) haphazard selection 
B) random selection 
C) systematic selection 
D) block selection

Question 15

Tests of controls are conducted to establish that:

Accepted Answer

A) there are no material misstatements in the financial statements 
B) controls operate effectively 
C) controls operate consistently throughout the period 
D) both a and c

Question 16

The decision of what constitutes sufficient appropriate audit evidence is a matter for professional judgement

Accepted Answer

A) True 
 B)False

Question 17

What impact will there be on sample size for substantive testing when there is an increase in the tolerable misstatement?

Accepted Answer

A) negligible 
B) increase 
C) decrease 
D) none of the above

Question 18

Non-sampling risk arises when an auditor:

Accepted Answer

A) uses an inappropriate audit procedure 
B) tests all of the items in a population 
C) does not use sampling 
D) spends too much time testing the accounts most at risk of material misstatement

Question 19

A disadvantage of statistical sampling is sometimes the costs involved in using the technique

Accepted Answer

A) True 
 B)False

Question 20

When testing controls,sampling risk is the risk that the auditor:

Accepted Answer

A) concludes that their client's internal controls are effective when they are ineffective 
B) both a and b 
C) concludes that their client's internal controls are ineffective when they are effective 
D) none of the above

Exam 7: Sampling and Overview of the Risk Response Phase of the Audit

Which of the following is a factor that influences the sample size when testing controls?

Non statistical sampling is easier to use than statistical sampling as it

When conducting detailed substantive procedures,auditors search for evidence that:

The permanent file includes detailed descriptions of evidence gathered for a particular year's audit.

An audit working paper generally includes:

The permanent file includes client information and documentation that apply to more than one audit.

When control risk is high the audit strategy is to:

When conducting substantive testing,an increase in the auditor's assessment of the risk of material misstatement will result in an increase in the size of the sample.

Control risk is the risk that:

Stratification of the population will result in less efficient sampling and increase the sample size required.

Which of the following would not be included in an auditor's permanent file?

Sampling is required when an audit procedure is tested on an entire group of transactions or all items within an account balance.

Sampling is not required when:

Which sampling method involves the selection of items that are grouped together within the population of items available?

Tests of controls are conducted to establish that:

The decision of what constitutes sufficient appropriate audit evidence is a matter for professional judgement

What impact will there be on sample size for substantive testing when there is an increase in the tolerable misstatement?

Non-sampling risk arises when an auditor:

A disadvantage of statistical sampling is sometimes the costs involved in using the technique

When testing controls,sampling risk is the risk that the auditor: