Exam 9: Audit Sampling

The 4,000 accounts receivable of Miller Company have a total book value of $150,000.A CPA has selected and audited a sample of 100 accounts with a total book value of $3,700 and an audited value of $3,800. -Using ratio estimation,an auditor has taken a sample of 150 from a population's 50,000 items;that population has a book value of $250,000.She found that in her sample the average audited value was $4.50,while the average book value was $5.20.What is the estimated total audited value of the population?

If all other factors specified in an attributes sampling plan remain constant,changing the specified tolerable rate from 8% to 6%,and changing the specified risk of assessing control risk too low from 7% to 3% would cause the required sample size to:

In testing accounts receivable,an auditor sends out positive confirmation requests to 100 randomly selected customers.A customer returns the confirmation indicating that the balance is correct when,in fact,the balance is overstated.This is an example of:

Audit sampling is used in conjunction with many audit tests,and may be performed on a statistical or nonstatistical basis. a.Define the term audit sampling. b.List and explain two advantages of the use of statistical sampling as compared to nonstatistical sampling.

A dual purpose test simultaneously:

When performing a test of a control over cash disbursements,a CPA may use a systematic sampling technique with a start at any randomly selected item.The biggest disadvantage of this type of sampling is that the items in the population:

Which of the following statements is correct about the sample size in statistical sampling when testing internal controls?

Statistical sampling can be used to test all control activities.

When evaluating the results of a variables sampling plan,the projected misstatement is calculated and compared to the risk of incorrect acceptance.

The auditors expect a population deviation rate of billing errors of eight percent,and have established a tolerable rate of five percent.The sampling approach most likely to be used is:

The auditors are using mean-per-unit sampling to evaluate the reasonableness of the book value of the accounts receivable of Smith,Inc.Smith has 10,000 receivable accounts with a total book value of $800,000.The auditors estimate the population's standard deviation as being equal to $25.After examining the overall audit plan,the auditors believe that the account's tolerable misstatement is $40,000,and that a risk of incorrect rejection of .10 (risk coefficient = 1.64)and a risk of incorrect acceptance of .15 (risk coefficient = 1.04)should be used. Required: a.Calculate the required sample size. Now ignore your sample size calculation in part "a," and assume that your answer was a sample size of 289 (the square root of 289 is 17)and that you obtained the following results: Average audited value of items in sample: $76.50 Average book value of items in sample: $78 Standard Deviation in the sample (audited values): $24 Standard Deviation in the sample (book values): $26 b.Using mean-per-unit sampling,calculate the projected misstatement for the population. c.Using mean-per-unit sampling,calculate the allowance for sampling risk and use it to form a statistical conclusion concerning the book value of the population ($800,000).That is,calculate an interval and either "accept" or "reject" the client's book value.

When using statistical sampling,which of the following need not be known to evaluate the results of an attributes sample?

Auditors have a variety of sampling approaches available.For each approach in the first column,identify the correct statement in the second column.Each statement may be used once,more than once,or not at all. -Discovery sampling.

An auditor wishes to estimate inventory shrinkage by weighing a sample of inventory items.From experience,the auditor knows that a few specific items are subject to unusually large amounts of shrinkage.In using statistical sampling,the auditor's best course of action is to:

Teal Corporation has 2,000 accounts receivable,with a total book value of $300,000.Ricardo Ramaro,CPA,has selected and audited a sample of 100 of the accounts with a combined book value of $16,100;the total of the audited values was $16,000.Using the mean-per-unit method,calculate the: a.Accounts receivable estimated audited value. b.Projected misstatement.

Stratification of the population generally results in a more efficient sampling plan.

An auditor plans to examine a sample of 20 checks for counter signatures as prescribed by the client's control procedures.One of the checks in the chosen sample of 20 cannot be found.The auditor should consider the reasons for this limitation and:

What effect does increasing the risk of incorrect acceptance have on sample size?

The 2,000 accounts receivable of ABC Company have a total book value of $40,000.Bob Rotter,CPA,has selected and audited a sample of 100 accounts with a total book value of $1,950.The audited value of the 100 accounts in the sample is $1,875. -Using the difference estimation technique,Rotter's estimate (to the nearest dollar)of year-end accounts receivable balance would be:

When using sampling for tests of controls,which of the following audit consequences may follow?