Question 1

An example of non-sampling risk is the selection of a random sample that is not representative of the population.

Accepted Answer

A) True 
 B)False

Question 2

In testing controls over invoices,an auditor discovers that in 10% of her statistical sample invoices were for amounts greater than the actual quantity shipped.In such a case,an appropriate response for her would be to __________.

Accepted Answer

A) increase her sample size to determine the extent of the control weakness 
B) recalculate control risk to determine if there is any effect on the nature,timing,or extent of her year-end procedures 
C) conclude that controls are working at 90% effectiveness and classify control risk as low 
D) consult with her partner to consider launching a fraud investigation 
A) increase her sample size to determine the extent of the control weakness 
B) recalculate control risk to determine if there is any effect on the nature,timing,or extent of her year-end procedures 
C) conclude that controls are working at 90% effectiveness and classify control risk as low 
D) consult with her partner to consider launching a fraud investigation

Question 3

Which of the following audit procedures is NOT typically used in audit sampling applications?

Accepted Answer

A) Observation of personnel and procedures. 
B) Physical count of tangible assets. 
C) Recalculation. 
D) Confirmation. 
A) Observation of personnel and procedures. 
B) Physical count of tangible assets. 
C) Recalculation. 
D) Confirmation.

Question 4

Calculate the projected likely misstatement (PLM)for the data given below using the average difference method and the ratio method.(Round to the nearest dollar. )
 $$\begin{array} { | l | l | l | } 
\hline \text { Case A } & \text { Case B } & \
\hline \text { Poplation size (logical units } & 1,500 \text { customer accourts } & 1,500 \text { customer accourts } \
\hline \text { Population size (accts. rec. } & \$ 300,000 & \$ 300,000 \
\text { total } & & \
\hline \text { Sarmple size(logical units } & 100 & 300 \
\hline \text { Book value in sample } & \$ 23,466 & \$ 62,095 \
\hline \text { Audited value in sample } & \$ 22,431 & \$ 60,295 \
\hline
\end{array}$$

Accepted Answer

The answer of Calculate the projected likely misstatement (PLM)for the...

Question 5

In an auditing context,which of the following scenarios describes a type II error?

Accepted Answer

A) An auditor applies non-statistical sampling methodology to a randomly selected sample. 
B) An auditor fails to uncover a material misstatement in an account that is,in reality,materially misstated. 
C) An auditor applies statistical sampling methodology to a non-randomly selected sample. 
D) An auditor concludes that an account is materially misstated,when in reality,it is not materially misstated. 
A) An auditor applies non-statistical sampling methodology to a randomly selected sample. 
B) An auditor fails to uncover a material misstatement in an account that is,in reality,materially misstated. 
C) An auditor applies statistical sampling methodology to a non-randomly selected sample. 
D) An auditor concludes that an account is materially misstated,when in reality,it is not materially misstated.

Question 6

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 rejection.

Accepted Answer

A) True 
 B)False

Question 7

The probability of concluding from a control test sample that the control risk is low,when in fact the risk should be assessed as high,is known as _____.

Accepted Answer

A) Sampling risk 
B) Information risk 
C) The risk of assessing the control risk too low 
D) Inherent risk 
A) Sampling risk 
B) Information risk 
C) The risk of assessing the control risk too low 
D) Inherent risk

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Which of the following courses of action is an auditor most likely to follow in designing a sampling plan for cash disbursements if the auditor is aware of several unusually large cash disbursements?

Accepted Answer

A) Increase the sample size to reduce the effect of the unusually large disbursements. 
B) Continue to draw new samples until all the unusually large disbursements are included in the sample. 
C) Set the tolerable deviation rate at a lower level than originally planned. 
D) Stratify the cash disbursements population so that all of the unusually large disbursements are selected. 
A) Increase the sample size to reduce the effect of the unusually large disbursements. 
B) Continue to draw new samples until all the unusually large disbursements are included in the sample. 
C) Set the tolerable deviation rate at a lower level than originally planned. 
D) Stratify the cash disbursements population so that all of the unusually large disbursements are selected.

Question 10

In a sample of confirmations sent to the auditee's customers,one customer failed to respond,despite the mailing of a second request.In this case,which of the following would NOT be an appropriate response?

Accepted Answer

A) When the auditor concludes from the confirmations received that accounts receivable is fairly stated and the customer's balance from the nonresponse could impact on that assessment,expand the sample,performing alternative procedures on the additional balances selected. 
B) When the auditor concludes from the confirmations received that accounts receivable is fairly stated and the customer's balance from the nonresponse is insignificant,it can be ignored. 
C) When the auditor concludes from the confirmations received that accounts receivable is materially misstated and the customer's balance from the nonresponse is insignificant,it can be ignored. 
D) Increase the initial assessment of incorrect acceptance and revise the sample size accordingly. 
A) When the auditor concludes from the confirmations received that accounts receivable is fairly stated and the customer's balance from the nonresponse could impact on that assessment,expand the sample,performing alternative procedures on the additional balances selected. 
B) When the auditor concludes from the confirmations received that accounts receivable is fairly stated and the customer's balance from the nonresponse is insignificant,it can be ignored. 
C) When the auditor concludes from the confirmations received that accounts receivable is materially misstated and the customer's balance from the nonresponse is insignificant,it can be ignored. 
D) Increase the initial assessment of incorrect acceptance and revise the sample size accordingly.

Question 11

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

Accepted Answer

A) Making an independent estimate of the amount of a FIFO inventory. 
B) Examining invoices in support of the valuation of fixed asset additions. 
C) Selecting accounts receivable for confirmation of account balances. 
D) Inspecting employee time cards for proper approval by supervisors. 
A) Making an independent estimate of the amount of a FIFO inventory. 
B) Examining invoices in support of the valuation of fixed asset additions. 
C) Selecting accounts receivable for confirmation of account balances. 
D) Inspecting employee time cards for proper approval by supervisors.

Question 12

In the audit of account balances,the sample size will tend to be smaller when the ________.

Accepted Answer

A) risk of incorrect acceptance is lower 
B) risk of incorrect rejection is lower 
C) tolerable misstatement is smaller 
D) population variability is smaller 
A) risk of incorrect acceptance is lower 
B) risk of incorrect rejection is lower 
C) tolerable misstatement is smaller 
D) population variability is smaller

Question 13

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

Accepted Answer

A) a misunderstanding of accounting principles 
B) sampling error 
C) management override of an internal control procedure 
D) risk of incorrect acceptance 
A) a misunderstanding of accounting principles 
B) sampling error 
C) management override of an internal control procedure 
D) risk of incorrect acceptance

Question 14

An appropriate level of effectiveness risk for a substantive test is:

Accepted Answer

A) Inversely related to the assessed inherent risk and control risk and directly related to the analytical procedures risk. 
B) Inversely related to the assessed inherent risk,control risk,and analytical procedures risk. 
C) Directly related to the assessed inherent risk and control risk and indirectly related to the analytical procedures risk. 
D) Directly related to the assessed inherent risk,control risk,and analytical procedures risk. 
A) Inversely related to the assessed inherent risk and control risk and directly related to the analytical procedures risk. 
B) Inversely related to the assessed inherent risk,control risk,and analytical procedures risk. 
C) Directly related to the assessed inherent risk and control risk and indirectly related to the analytical procedures risk. 
D) Directly related to the assessed inherent risk,control risk,and analytical procedures risk.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is an advantage of statistical sampling?

Accepted Answer

A) It permits a less rigid approach to unique audit problems. 
B) It uses an evaluation method that allows evaluation of the sample on factors other than the sample evidence. 
C) It permits auditors to use a computer to select a random sample. 
D) It requires auditors to be exact in their judgments on risk and materiality. 
A) It permits a less rigid approach to unique audit problems. 
B) It uses an evaluation method that allows evaluation of the sample on factors other than the sample evidence. 
C) It permits auditors to use a computer to select a random sample. 
D) It requires auditors to be exact in their judgments on risk and materiality.

Question 17

The standard deviation of a population of data is a statistical measure of ________.

Accepted Answer

A) how much data are skewed 
B) how much data are correlated 
C) the population variability 
D) the average value of data items 
A) how much data are skewed 
B) how much data are correlated 
C) the population variability 
D) the average value of data items

Question 18

Green CPA audited the inventory of ABC Company on a sample basis.Green audited a sample of 120 items and found a net overstatement of $600.The audited sample had a recorded value of $12,000.The entire inventory contained 2,400 items with a total book value of $280,000.The projected likely overstatement using the average difference method is ________.

Accepted Answer

A) $12,000 
B) $14,000 
C) $48,000 
D) $56,000 
A) $12,000 
B) $14,000 
C) $48,000 
D) $56,000

Question 19

A test of balance procedure is being performed on the spare parts inventory listing.The listing consists of 10 items that equal or exceed performance materiality and 55 items that are less than materiality.What would be an appropriate sampling approach in this case?

Accepted Answer

A) Select a randomly sample from all 65 items contained in the inventory list. 
B) Select a small sample from 10 items over materiality and a larger sample from the remaining 55 items. 
C) Test all 10 items at or above materiality,then select a random sample from the remaining 55 items. 
D) Test all 10 items at or above materiality only,as the remaining items are each immaterial. 
A) Select a randomly sample from all 65 items contained in the inventory list. 
B) Select a small sample from 10 items over materiality and a larger sample from the remaining 55 items. 
C) Test all 10 items at or above materiality,then select a random sample from the remaining 55 items. 
D) Test all 10 items at or above materiality only,as the remaining items are each immaterial.

Question 20

Which of the following selection methods is least likely to result in a sample representative of all transactions?

Accepted Answer

A) Block sampling 
B) Random sampling 
C) Haphazard sampling 
D) Systematic sampling 
A) Block sampling 
B) Random sampling 
C) Haphazard sampling 
D) Systematic sampling

An example of non-sampling risk is the selection of a random sample that is not representative of the population.

In testing controls over invoices,an auditor discovers that in 10% of her statistical sample invoices were for amounts greater than the actual quantity shipped.In such a case,an appropriate response for her would be to __________.

Which of the following audit procedures is NOT typically used in audit sampling applications?

In an auditing context,which of the following scenarios describes a type II error?

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 rejection.

The probability of concluding from a control test sample that the control risk is low,when in fact the risk should be assessed as high,is known as _____.

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

Which of the following courses of action is an auditor most likely to follow in designing a sampling plan for cash disbursements if the auditor is aware of several unusually large cash disbursements?

In a sample of confirmations sent to the auditee's customers,one customer failed to respond,despite the mailing of a second request.In this case,which of the following would NOT be an appropriate response?

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

In the audit of account balances,the sample size will tend to be smaller when the ________.

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

An appropriate level of effectiveness risk for a substantive test is:

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

Which of the following is an advantage of statistical sampling?

The standard deviation of a population of data is a statistical measure of ________.

A test of balance procedure is being performed on the spare parts inventory listing.The listing consists of 10 items that equal or exceed performance materiality and 55 items that are less than materiality.What would be an appropriate sampling approach in this case?

Which of the following selection methods is least likely to result in a sample representative of all transactions?

Introduction to Auditing

Auditors Professional Roles and Responsibilities

Auditors Ethical and Legal Responsibilities

Reports on Audited Financial Statements

Preliminary Audit Planning: Understanding the Auditees Business

Assessing Risks in an Audit Engagement

Internal Control Over Financial Reporting

Audit Evidence and Assurance

Control Assessment and Testing

The Revenues, receivables, and Receipts Process and Cash Account Balance

The Purchases, payables, and Payments Process

Payroll and Production Processes

The Finance and Investment Process

Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue the Audit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

The Audit of Accounting Estimates: Basic Material Relating to Accounting Estimates

Legal Liability Cases

Other Professional Accounting Services and Reports, including Fraud Auditing

Filters

Exam 10: Audit Sampling

An example of non-sampling risk is the selection of a random sample that is not representative of the population.

In testing controls over invoices,an auditor discovers that in 10% of her statistical sample invoices were for amounts greater than the actual quantity shipped.In such a case,an appropriate response for her would be to __________.

Which of the following audit procedures is NOT typically used in audit sampling applications?

In an auditing context,which of the following scenarios describes a type II error?

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 rejection.

The probability of concluding from a control test sample that the control risk is low,when in fact the risk should be assessed as high,is known as _____.

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

Which of the following courses of action is an auditor most likely to follow in designing a sampling plan for cash disbursements if the auditor is aware of several unusually large cash disbursements?

In a sample of confirmations sent to the auditee's customers,one customer failed to respond,despite the mailing of a second request.In this case,which of the following would NOT be an appropriate response?

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

In the audit of account balances,the sample size will tend to be smaller when the ________.

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

An appropriate level of effectiveness risk for a substantive test is:

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

Which of the following is an advantage of statistical sampling?

The standard deviation of a population of data is a statistical measure of ________.

A test of balance procedure is being performed on the spare parts inventory listing.The listing consists of 10 items that equal or exceed performance materiality and 55 items that are less than materiality.What would be an appropriate sampling approach in this case?

Which of the following selection methods is least likely to result in a sample representative of all transactions?

Introduction to Auditing

Auditors Professional Roles and Responsibilities

Auditors Ethical and Legal Responsibilities

Reports on Audited Financial Statements

Preliminary Audit Planning: Understanding the Auditees Business

Assessing Risks in an Audit Engagement

Internal Control Over Financial Reporting

Audit Evidence and Assurance

Control Assessment and Testing

The Revenues, receivables, and Receipts Process and Cash Account Balance

The Purchases, payables, and Payments Process

Payroll and Production Processes

The Finance and Investment Process

Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue the Audit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

The Audit of Accounting Estimates: Basic Material Relating to Accounting Estimates

Legal Liability Cases

Other Professional Accounting Services and Reports, including Fraud Auditing

Filters