Question 1

Which of the following statements is a valid criticism of the use of non-statistical sampling methods?

Accepted Answer

A)  Many audit tests, such as footing of journals, must be performed outside a statistical sampling context. 
B)  The cost of performing random selection or testing often exceeds the benefits. 
C)  Nonstatistical sampling does not differ substantially from statistical sampling methods. 
D)  It can be difficult to remain unbiased in the selection of items. 
A)  Many audit tests, such as footing of journals, must be performed outside a statistical sampling context. 
B)  The cost of performing random selection or testing often exceeds the benefits. 
C)  Nonstatistical sampling does not differ substantially from statistical sampling methods. 
D)  It can be difficult to remain unbiased in the selection of items.

Question 2

When does the auditor use simple random sampling?

Accepted Answer

A)  when the auditor has a particular judgmental criteria that is used to select the sample 
B)  where the auditor wants numbers in sequence and would like to select the sample rapidly 
C)  for testing of cutoff after the year end with respect to accounts payable 
D)  for populations where each item is considered to have the same characteristics for audit purposes 
A)  when the auditor has a particular judgmental criteria that is used to select the sample 
B)  where the auditor wants numbers in sequence and would like to select the sample rapidly 
C)  for testing of cutoff after the year end with respect to accounts payable 
D)  for populations where each item is considered to have the same characteristics for audit purposes

Question 3

If all other factors specified in a sampling plan remain constant, changing the estimated population exception rate (EPER) from 2% to 4% would cause the required sample size to

Accepted Answer

A)  increase. 
B)  remain the same. 
C)  decrease. 
D)  become indeterminate. 
A)  increase. 
B)  remain the same. 
C)  decrease. 
D)  become indeterminate.

Question 4

During the audit of the fixed asset section, the auditor decided to inspect source documents supporting all fixed asset additions exceeding $3000. This type of audit procedure is called a

Accepted Answer

A)  census of the strata over $3000. 
B)  analytical review. 
C)  attribute sample. 
D)  monetary unit sample. 
A)  census of the strata over $3000. 
B)  analytical review. 
C)  attribute sample. 
D)  monetary unit sample.

Question 5

The tolerable exception rate (TER) has a significant effect on sample size. The relationship of TER to sample size is

Accepted Answer

A)  direct (larger TER = larger sample). 
B)  inverse (larger TER = smaller sample). 
C)  variable (sometimes larger, sometimes smaller). 
D)  not determinable. 
A)  direct (larger TER = larger sample). 
B)  inverse (larger TER = smaller sample). 
C)  variable (sometimes larger, sometimes smaller). 
D)  not determinable.

Question 6

If an auditor would like to estimate how many sales invoices have errors (such as no required order number showing or authorization for customers exceeding their credit limit), the auditor would likely use

Accepted Answer

A)  random sampling with replacement. 
B)  sampling for attributes. 
C)  sampling for variables. 
D)  stratified random sampling. 
A)  random sampling with replacement. 
B)  sampling for attributes. 
C)  sampling for variables. 
D)  stratified random sampling.

Question 7

You have recently been hired as an audit trainee with an internal audit department. Your first assignment will be to select the sample for a test of new capital assets acquired over the last two years. Your review of the internal audit files indicates that the last time this work was done the sample to be tested was selected on a judgmental nonstatistical basis. Based on your university/college auditing course, you believe the work offers good potential for the use of statistical sampling techniques. You know that you will have to be able to explain and justify your opinion to the internal audit manager.
Required:
Both statistical sampling and nonstatistical or judgmental sampling have advantages and disadvantages. Briefly state two advantages and two disadvantages of statistical sampling and one advantage and one disadvantage of nonstatistical sampling.

Accepted Answer

Advantages of statistical sampling:
•res

Which of the following statements is a valid criticism of the use of non-statistical sampling methods?

When does the auditor use simple random sampling?

If all other factors specified in a sampling plan remain constant, changing the estimated population exception rate (EPER) from 2% to 4% would cause the required sample size to

During the audit of the fixed asset section, the auditor decided to inspect source documents supporting all fixed asset additions exceeding $3000. This type of audit procedure is called a

The tolerable exception rate (TER) has a significant effect on sample size. The relationship of TER to sample size is

If an auditor would like to estimate how many sales invoices have errors (such as no required order number showing or authorization for customers exceeding their credit limit), the auditor would likely use

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Legal Liability

Professional Judgment and Ethics

Audit Responsibilities and Objectives

Client Acceptance and Planning the Audit

Materiality and Risk

Internal Controls and Control Risk

Audit Evidence

Audit Strategy and Audit Program

Audit of the Revenue Cycle

Audit of the Acquisition and Payment Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

Filters

Exam 11: Audit Sampling Concepts

Which of the following statements is a valid criticism of the use of non-statistical sampling methods?

When does the auditor use simple random sampling?

If all other factors specified in a sampling plan remain constant, changing the estimated population exception rate (EPER) from 2% to 4% would cause the required sample size to

During the audit of the fixed asset section, the auditor decided to inspect source documents supporting all fixed asset additions exceeding $3000. This type of audit procedure is called a

The tolerable exception rate (TER) has a significant effect on sample size. The relationship of TER to sample size is

If an auditor would like to estimate how many sales invoices have errors (such as no required order number showing or authorization for customers exceeding their credit limit), the auditor would likely use

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Legal Liability

Professional Judgment and Ethics

Audit Responsibilities and Objectives

Client Acceptance and Planning the Audit

Materiality and Risk

Internal Controls and Control Risk

Audit Evidence

Audit Strategy and Audit Program

Audit of the Revenue Cycle

Audit of the Acquisition and Payment Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

Filters