Question 1

Auditors project the misstatements found in the sample to the population when using statistical sampling, but not when using nonstatistical sampling.

Accepted Answer

A) True 
 B)False

Question 2

The definition of a "deviation" for a test of a control should include only those deviations that result in misstatements in the financial statements.

Accepted Answer

A) True 
 B)False

Question 3

In assessing sampling risk, the risk of incorrect rejection and the risk of assessing control risk too high relate to the:

Accepted Answer

A)  Efficiency of the audit. 
B)  Effectiveness of the audit. 
C)  Selection of the sample. 
D)  Audit quality controls. 
A)  Efficiency of the audit. 
B)  Effectiveness of the audit. 
C)  Selection of the sample. 
D)  Audit quality controls.

Question 4

Various factors influence the sample size for a substantive test of details of an account balance. All other factors being equal, which of the following would lead to a larger sample size?

Accepted Answer

A)  Lower assessment of control risk. 
B)  Greater reliance on analytical procedures. 
C)  Smaller expected frequency of misstatements. 
D)  Smaller measure of tolerable misstatement. 
A)  Lower assessment of control risk. 
B)  Greater reliance on analytical procedures. 
C)  Smaller expected frequency of misstatements. 
D)  Smaller measure of tolerable misstatement.

Question 5

The 3,000 accounts receivable of DEF Company have a total book value of $60,000. Bob Smith, CPA, has selected and audited a sample of 100 accounts with a total book value of $2,100. Using the difference estimation technique, Smith has properly estimated a projected misstatement of a $9,000 overstatement for the entire population. The estimated total audited value of the population is:

Accepted Answer

A)  $51,000 
B)  $58,000 
C)  $60,000 
D)  $69,000 
A)  $51,000 
B)  $58,000 
C)  $60,000 
D)  $69,000

Question 6

Increases in the tolerable misstatement result in a decreased sample size when using mean-per-unit estimation.

Accepted Answer

A) True 
 B)False

Question 7

When performing tests of controls over authorization of cash receipts, which of the following sampling methods would be most appropriate?

Accepted Answer

A)  Attributes. 
B)  Ratio. 
C)  Stratified. 
D)  Variables. 
A)  Attributes. 
B)  Ratio. 
C)  Stratified. 
D)  Variables.

Question 8

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
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 adjusted 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.

Accepted Answer

a. The required sample size is calculate

Question 9

Using the ratio estimation technique, Rotter's estimate (to the nearest dollar) of year-end accounts receivable balance would be:

Accepted Answer

A)  $37,500 
B)  $38,462 
C)  $38,500 
D)  $41,600 
A)  $37,500 
B)  $38,462 
C)  $38,500 
D)  $41,600

Question 10

Assume a mean-per-unit estimation variables sampling application with a tolerable misstatement of $70,000 and a book value of $700,000. After performing the sampling plan, the auditors calculated an adjusted allowance for sampling risk of $45,000 and a point estimate of the population's total audited value to be $650,000. Based on these results, the auditor would:

Accepted Answer

A)  Because the tolerable misstatement exceeds the adjusted allowance for sampling risk, conclude that the population does not contain a material misstatement. 
B)  Because the total audited value ± tolerable misstatement includes the book value, conclude that the population does not contain a material misstatement. 
C)  Because the tolerable misstatement exceeds the adjusted allowance for sampling risk, conclude that there is too great a risk that the account balance is materially misstated. 
D)  Because the total audited value ± adjusted allowance for sampling risk does not include the book value, conclude that there is too great a risk that the account balance is materially misstated. 
A)  Because the tolerable misstatement exceeds the adjusted allowance for sampling risk, conclude that the population does not contain a material misstatement. 
B)  Because the total audited value ± tolerable misstatement includes the book value, conclude that the population does not contain a material misstatement. 
C)  Because the tolerable misstatement exceeds the adjusted allowance for sampling risk, conclude that there is too great a risk that the account balance is materially misstated. 
D)  Because the total audited value ± adjusted allowance for sampling risk does not include the book value, conclude that there is too great a risk that the account balance is materially misstated.

Question 11

What is the estimated total audited value using mean-per-unit sampling?

Accepted Answer

A)  $19,000. 
B)  $19,600. 
C)  $20,000. 
D)  $20,632. 
A)  $19,000. 
B)  $19,600. 
C)  $20,000. 
D)  $20,632.

Question 12

Which of the following statistical selection techniques is least desirable for use by an auditor?

Accepted Answer

A)  Systematic selection. 
B)  Stratified selection. 
C)  Block selection. 
D)  Sequential selection. 
A)  Systematic selection. 
B)  Stratified selection. 
C)  Block selection. 
D)  Sequential selection.

Question 13

Assume a mean-per-unit estimation variables sampling application with a tolerable misstatement of $70,000 and a book value of $700,000. After performing the sampling plan, the auditors calculated an adjusted allowance for sampling risk of $45,000 and a point estimate of the population's total audited value to be $640,000. The projected misstatement based on this sample is:

Accepted Answer

A)  $5,000 
B)  $45,000 
C)  $60,000 
D)  $70,000 
A)  $5,000 
B)  $45,000 
C)  $60,000 
D)  $70,000

Question 14

A dual purpose test simultaneously:

Accepted Answer

A)  Addresses two different accounts. 
B)  Functions as a substantive test and as a test of controls. 
C)  Functions as an analytical procedure and a substantive test. 
D)  Substantiates an ending balance and the transactions making up the balance. 
A)  Addresses two different accounts. 
B)  Functions as a substantive test and as a test of controls. 
C)  Functions as an analytical procedure and a substantive test. 
D)  Substantiates an ending balance and the transactions making up the balance.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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.

Accepted Answer

a. Audit sampling is performing a test o

Question 17

When using a statistical sampling plan, the auditors would probably require a smaller sample if the:

Accepted Answer

A)  Population increases. 
B)  Desired allowance for sampling risk decreases. 
C)  Desired risk of incorrect acceptance increases. 
D)  Expected deviation rate increases. 
A)  Population increases. 
B)  Desired allowance for sampling risk decreases. 
C)  Desired risk of incorrect acceptance increases. 
D)  Expected deviation rate increases.

Question 18

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

Accepted Answer

A)  If sample results indicate that the control is operating effectively, but in fact it is not, control risk will be assessed too low. 
B)  If sample results indicate that the control is operating effectively, but in fact it is not, control risk will be assessed too high. 
C)  If sample results indicate that the control is not operating effectively, but in fact it is operating effectively, the audit is likely to be faulty because of reduced substantive tests. 
D)  If sample results indicate that the control is not operating effectively, but in fact it is operating effectively, control risk will be assessed too low. 
A)  If sample results indicate that the control is operating effectively, but in fact it is not, control risk will be assessed too low. 
B)  If sample results indicate that the control is operating effectively, but in fact it is not, control risk will be assessed too high. 
C)  If sample results indicate that the control is not operating effectively, but in fact it is operating effectively, the audit is likely to be faulty because of reduced substantive tests. 
D)  If sample results indicate that the control is not operating effectively, but in fact it is operating effectively, control risk will be assessed too low.

Question 19

Which of the following situations will result in the auditors concluding that the risk of material misstatement is too high when using nonstatistical sampling for substantive tests?

Accepted Answer

A)  The projected misstatement exceeds the tolerable misstatement. 
B)  The allowance for sampling risk exceeds the projected misstatement. 
C)  The risk of incorrect acceptance exceeds the risk of incorrect rejection. 
D)  The tolerable misstatement exceeds the sample net misstatement. 
A)  The projected misstatement exceeds the tolerable misstatement. 
B)  The allowance for sampling risk exceeds the projected misstatement. 
C)  The risk of incorrect acceptance exceeds the risk of incorrect rejection. 
D)  The tolerable misstatement exceeds the sample net misstatement.

Question 20

What is the estimated total audited value using difference estimation sampling?

Accepted Answer

A)  $19,387. 
B)  $19,400. 
C)  $19,600. 
D)  $20,600. 
A)  $19,387. 
B)  $19,400. 
C)  $19,600. 
D)  $20,600.

Auditors project the misstatements found in the sample to the population when using statistical sampling, but not when using nonstatistical sampling.

The definition of a "deviation" for a test of a control should include only those deviations that result in misstatements in the financial statements.

In assessing sampling risk, the risk of incorrect rejection and the risk of assessing control risk too high relate to the:

Various factors influence the sample size for a substantive test of details of an account balance. All other factors being equal, which of the following would lead to a larger sample size?

Increases in the tolerable misstatement result in a decreased sample size when using mean-per-unit estimation.

When performing tests of controls over authorization of cash receipts, which of the following sampling methods would be most appropriate?

Using the ratio estimation technique, Rotter's estimate (to the nearest dollar) of year-end accounts receivable balance would be:

What is the estimated total audited value using mean-per-unit sampling?

Which of the following statistical selection techniques is least desirable for use by an auditor?

A dual purpose test simultaneously:

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

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.

When using a statistical sampling plan, the auditors would probably require a smaller sample if the:

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

Which of the following situations will result in the auditors concluding that the risk of material misstatement is too high when using nonstatistical sampling for substantive tests?

What is the estimated total audited value using difference estimation sampling?

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Planning the Audit; Linking Audit Procedures to Risk

Internal Control

Consideration of Internal Control in an Information Technology Environment

Cash and Financial Investments

Accounts Receivable, Notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Property, Plant, and Equipment: Depreciation and Depletion

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditing Operations and Completing the Audit

Auditors Report

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, Operational, and Compliance Auditing

Filters

Exam 9: Audit Sampling

Auditors project the misstatements found in the sample to the population when using statistical sampling, but not when using nonstatistical sampling.

The definition of a "deviation" for a test of a control should include only those deviations that result in misstatements in the financial statements.

In assessing sampling risk, the risk of incorrect rejection and the risk of assessing control risk too high relate to the:

Various factors influence the sample size for a substantive test of details of an account balance. All other factors being equal, which of the following would lead to a larger sample size?

Increases in the tolerable misstatement result in a decreased sample size when using mean-per-unit estimation.

When performing tests of controls over authorization of cash receipts, which of the following sampling methods would be most appropriate?

Using the ratio estimation technique, Rotter's estimate (to the nearest dollar) of year-end accounts receivable balance would be:

What is the estimated total audited value using mean-per-unit sampling?

Which of the following statistical selection techniques is least desirable for use by an auditor?

A dual purpose test simultaneously:

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

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.

When using a statistical sampling plan, the auditors would probably require a smaller sample if the:

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

Which of the following situations will result in the auditors concluding that the risk of material misstatement is too high when using nonstatistical sampling for substantive tests?

What is the estimated total audited value using difference estimation sampling?

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Planning the Audit; Linking Audit Procedures to Risk

Internal Control

Consideration of Internal Control in an Information Technology Environment

Cash and Financial Investments

Accounts Receivable, Notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Property, Plant, and Equipment: Depreciation and Depletion

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditing Operations and Completing the Audit

Auditors Report

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, Operational, and Compliance Auditing

Filters