Exam 10: Audit Sampling

In specifying the objectives for substantive testing of accounts receivable, an auditor hypothesizes that the company does not have a right to collect the money, and looks for evidence that they do.

Assessing control risk too low threatens the efficiency of the audit but not the effectiveness.

Analytical procedures, such as vertical analysis, ratio calculations, and time series analysis, are usually done on a sample basis.

The purpose of tests of controls is to determine whether

The total amount of monetary error that is found in a sample is referred to as the

For which of the following audit tests is an auditor most likely to use attribute sampling?

Attribute sampling is audit sampling in which auditors look for the presence or absence of a control condition.

An advantage of statistical sampling over non-statistical sampling is that statistical sampling helps an auditor to

The amount by which a projected, likely misstatement differs from an actual misstatement is usually the result of

When the projected likely misstatement is greater than the tolerable misstatement in a sample-based audit of an account balance, the auditor can decide that the account balance is materially misstated and therefore run the risk of incorrect acceptance.

When auditors perform procedures using statistical sampling and obtain sufficient evidence, a conclusion about the population characteristics will not be wrong.

Detection risk is the risk that the auditor will not detect material misstatements in the accounts.To limit detection risk to an acceptable level, the auditor

Which of the following is used in attribute sampling to determine the sample size?

The risk model is defined as AR = IR x CR x DR.The risk of assessing control risk too low can lead to:

A number of factors can affect the size of a sample for a substantive audit of the details of an account balance.All other factors being equal, which of the following would lead to a larger sample size?

After extrapolating the results of performing substantive tests on a sample of accounts from the accounts receivable subsidiary ledger, Allen CA concluded that the accounts receivable balance was materially misstated.In fact, the balance was materially correct.This situation illustrates the risk of

If the association of population items with random numbers is difficult and expensive, but the auditor does not have sufficient knowledge about the population the auditor should:

As a result of tests of controls, an auditor assessed control risk too low and decreased substantive testing.This assessment resulted because the true deviation rate in the population was

In making a decision about the extent of misstatement in a population, the known misstatement in the sample must be projected to the population.

When evaluating the results of substantive audit procedures, auditors run the sampling risk(s) of