Question 1

Changing from a sampling plan using random selection with replacement to random selection without replacement has what effect on the required sample size?

Accepted Answer

A)  Increases. 
B)  Decreases. 
C)  No effect. 
D)  An indeterminate effect. 
A)  Increases. 
B)  Decreases. 
C)  No effect. 
D)  An indeterminate effect.

Question 2

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:

Accepted Answer

A)  Eliminate any of the items known to be subject to unusually large amounts of shrinkage. 
B)  Increase the sample size to lessen the effect of the items subject to unusually large amounts of shrinkage. 
C)  Stratify the inventory population so that items subject to unusually large amounts of shrinkage are reviewed separately. 
D)  Continue to draw new samples until a sample is drawn which includes none of the items known to be subject to large amounts of shrinkage. 
A)  Eliminate any of the items known to be subject to unusually large amounts of shrinkage. 
B)  Increase the sample size to lessen the effect of the items subject to unusually large amounts of shrinkage. 
C)  Stratify the inventory population so that items subject to unusually large amounts of shrinkage are reviewed separately. 
D)  Continue to draw new samples until a sample is drawn which includes none of the items known to be subject to large amounts of shrinkage.

Question 3

Which of the following statistical sampling techniques involves taking samples in a series of stages?

Accepted Answer

A)  Systematic sampling. 
B)  Sequential sampling. 
C)  Continuous sampling. 
D)  Multiple location sampling. 
A)  Systematic sampling. 
B)  Sequential sampling. 
C)  Continuous sampling. 
D)  Multiple location sampling.

Question 4

Which of the following factors does an auditor need to consider in planning a particular audit sample for a test of control?

Accepted Answer

A)  Number of items in the population. 
B)  Total dollar amount of the items to be sampled. 
C)  Acceptable level of risk of assessing control risk too low. 
D)  Tolerable misstatement. 
A)  Number of items in the population. 
B)  Total dollar amount of the items to be sampled. 
C)  Acceptable level of risk of assessing control risk too low. 
D)  Tolerable misstatement.

Question 5

Which of the following is an advantage of systematic selection over random number selection?

Accepted Answer

A)  It provides a stronger basis for statistical conclusions. 
B)  It enables the auditor to use the more efficient "sampling with replacement" tables. 
C)  There may be correlation between the location of items in the population, the feature of sampling interest, and the sampling interval. 
D)  It does not require establishment of correspondence between random numbers and items in the population. 
A)  It provides a stronger basis for statistical conclusions. 
B)  It enables the auditor to use the more efficient "sampling with replacement" tables. 
C)  There may be correlation between the location of items in the population, the feature of sampling interest, and the sampling interval. 
D)  It does not require establishment of correspondence between random numbers and items in the population.

Question 6

Using the ratio estimation technique, the estimated total audited value of the population is:

Accepted Answer

A)  $100,000. 
B)  $120,000. 
C)  $140,000. 
D)  $144,000. 
A)  $100,000. 
B)  $120,000. 
C)  $140,000. 
D)  $144,000.

Question 7

Using ratio and difference estimation for a sample is an example of a dual purpose test.

Accepted Answer

A) True 
 B)False

Question 8

Statistical sampling cannot be used to test all control activities.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is generally not true about statistical sampling as compared to nonstatistical sampling?

Accepted Answer

A)  Statistical samples are more representative of the population. 
B)  Statistical sample plans involve additional costs of evaluation. 
C)  Statistical sampling allows a more objective evaluation of sample results. 
D)  Statistical sampling may assist the auditors in designing more efficient samples. 
A)  Statistical samples are more representative of the population. 
B)  Statistical sample plans involve additional costs of evaluation. 
C)  Statistical sampling allows a more objective evaluation of sample results. 
D)  Statistical sampling may assist the auditors in designing more efficient samples.

Question 10

If the projected misstatement in a nonstatistical sampling is $8,000, while the tolerable misstatement is $9,000, what would an auditor likely conclude?

Accepted Answer

A)  Since the projected misstatement is less than the tolerable misstatement, the account is not misstated. 
B)  Since the projected misstatement is less than the tolerable misstatement, the account is misstated. 
C)  The risk is high that the account is materially misstated. 
D)  The analysis has been improperly performed since the projected misstatement is unequal to the tolerable misstatement. 
A)  Since the projected misstatement is less than the tolerable misstatement, the account is not misstated. 
B)  Since the projected misstatement is less than the tolerable misstatement, the account is misstated. 
C)  The risk is high that the account is materially misstated. 
D)  The analysis has been improperly performed since the projected misstatement is unequal to the tolerable misstatement.

Question 11

When the auditors have decided to use statistical rather than nonstatistical sampling, a disadvantage is that:

Accepted Answer

A)  Designing efficient samples is more difficult. 
B)  The costs of training staff may be higher. 
C)  Sampling without replacement must be used. 
D)  Objectively evaluating results is impossible. 
A)  Designing efficient samples is more difficult. 
B)  The costs of training staff may be higher. 
C)  Sampling without replacement must be used. 
D)  Objectively evaluating results is impossible.

Question 12

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:

Accepted Answer

A)  Attributes sampling. 
B)  Stratified random sampling. 
C)  Variables sampling. 
D)  None, as sampling does not seem appropriate in this situation. 
A)  Attributes sampling. 
B)  Stratified random sampling. 
C)  Variables sampling. 
D)  None, as sampling does not seem appropriate in this situation.

Question 13

The mean book value of the items included in a mean-per-unit sample is not directly used in the evaluation of sample results.

Accepted Answer

A) True 
 B)False

Question 14

Using the difference estimation technique, estimated total audited value of the population is:

Accepted Answer

A)  $100,000. 
B)  $120,000. 
C)  $140,000. 
D)  $144,000. 
A)  $100,000. 
B)  $120,000. 
C)  $140,000. 
D)  $144,000.

Question 15

The tolerable deviation rate in sampling for tests of controls is:

Accepted Answer

A)  Used to determine the probability of the auditor's conclusion based upon reliance factors. 
B)  The probability that the financial statements are not materially in error. 
C)  A measure of the reliability of substantive tests. 
D)  The rate the auditor will tolerate without modifying the planned assessment of control risk. 
A)  Used to determine the probability of the auditor's conclusion based upon reliance factors. 
B)  The probability that the financial statements are not materially in error. 
C)  A measure of the reliability of substantive tests. 
D)  The rate the auditor will tolerate without modifying the planned assessment of control risk.

Question 16

An advantage of using statistical sampling techniques is that such techniques:

Accepted Answer

A)  Mathematically measure risk. 
B)  Eliminate the need for judgmental decisions. 
C)  Define the values of allowance for sampling risk and tolerable misstatement required to provide audit satisfaction. 
D)  Have been established in the courts to be superior to judgmental sampling. 
A)  Mathematically measure risk. 
B)  Eliminate the need for judgmental decisions. 
C)  Define the values of allowance for sampling risk and tolerable misstatement required to provide audit satisfaction. 
D)  Have been established in the courts to be superior to judgmental sampling.

Question 17

In the past, the auditors have found that the book value of a receivable account has been related to the amount the account is misstated (i.e., large accounts have large misstatements and small accounts have small misstatements). Which of the following techniques is most likely to be efficient?

Accepted Answer

A)  Mean-per-unit estimation. 
B)  Ratio estimation. 
C)  Difference estimation. 
D)  Sequential sampling estimation. 
A)  Mean-per-unit estimation. 
B)  Ratio estimation. 
C)  Difference estimation. 
D)  Sequential sampling estimation.

Question 18

Discovery sampling is equivalent to an attributes sampling plan with a specified expected deviation rate of 0 percent.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not generally used for selecting samples?

Accepted Answer

A)  Random number tables. 
B)  Random number generators. 
C)  Physical representation numbers. 
D)  Systematic selection. 
A)  Random number tables. 
B)  Random number generators. 
C)  Physical representation numbers. 
D)  Systematic selection.

Question 20

Using the difference 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

Exam 9: Audit Sampling

Changing from a sampling plan using random selection with replacement to random selection without replacement has what effect on the required sample size?

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:

Which of the following statistical sampling techniques involves taking samples in a series of stages?

Which of the following factors does an auditor need to consider in planning a particular audit sample for a test of control?

Which of the following is an advantage of systematic selection over random number selection?

Using the ratio estimation technique, the estimated total audited value of the population is:

Using ratio and difference estimation for a sample is an example of a dual purpose test.

Statistical sampling cannot be used to test all control activities.

Which of the following is generally not true about statistical sampling as compared to nonstatistical sampling?

If the projected misstatement in a nonstatistical sampling is $8,000, while the tolerable misstatement is $9,000, what would an auditor likely conclude?

When the auditors have decided to use statistical rather than nonstatistical sampling, a disadvantage is that:

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 mean book value of the items included in a mean-per-unit sample is not directly used in the evaluation of sample results.

Using the difference estimation technique, estimated total audited value of the population is:

The tolerable deviation rate in sampling for tests of controls is:

An advantage of using statistical sampling techniques is that such techniques:

In the past, the auditors have found that the book value of a receivable account has been related to the amount the account is misstated (i.e., large accounts have large misstatements and small accounts have small misstatements). Which of the following techniques is most likely to be efficient?

Discovery sampling is equivalent to an attributes sampling plan with a specified expected deviation rate of 0 percent.

Which of the following is not generally used for selecting samples?

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

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Consideration of Internal Control in an Information Technology Environment

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Accounts Receivable, Notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Property, Plant, and Equipment: Depreciation and Depletion

Accounts Payable and Other Liabilities

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