Question 1

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. D

Question 2

Which of the following is a term used to describe a departure from a prescribed internal control procedure?

Accepted Answer

A) Exception. 
B) Event. 
C) Misstatement. 
D) Known error. 
A) Exception. 
B) Event. 
C) Misstatement. 
D) Known error. A

Question 3

The determination of an appropriate sample on a representative basis must be made using statistical methods.

Accepted Answer

A) True 
 B)False  False

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. )

Accepted Answer

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

Question 5

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 6

The purpose of tests of controls is to determine whether ________.

Accepted Answer

A) internal control policies and procedures are working as prescribed 
B) substantive testing can be kept to a minimum 
C) errors and irregularities are prevented or detected in a timely manner 
D) the auditor has an understanding of the control system 
A) internal control policies and procedures are working as prescribed 
B) substantive testing can be kept to a minimum 
C) errors and irregularities are prevented or detected in a timely manner 
D) the auditor has an understanding of the control system

Question 7

Using the audit risk model: If audit risk is 0.05,inherent risk is 1.0,control risk is 0.20,and analytical procedures risk is 1.0,the risk of incorrect acceptance is 0.25.

Accepted Answer

A) True 
 B)False

Question 8

The probability that an auditor's conclusion based on a sample might differ from the auditor's conclusion based on an audit of the entire population identifies the concept of ________.

Accepted Answer

A) sampling risk 
B) confidence levels 
C) statistical sampling 
D) tolerable rate and the expected deviation rate 
A) sampling risk 
B) confidence levels 
C) statistical sampling 
D) tolerable rate and the expected deviation rate

Question 9

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 acceptance.

Accepted Answer

A) True 
 B)False

Question 10

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 11

The risk of assessing control risk too high is the risk that the evidence of compliance with control procedures in the sample indicates ________.

Accepted Answer

A) low control risk when the actual degree of compliance does not justify a low control risk assessment 
B) low control risk when the actual degree of compliance justifies a low control risk assessment 
C) high control risk when the actual degree of compliance would justify a lower control risk assessment 
D) high control risk when the actual degree of compliance would justify a higher control risk assessment 
A) low control risk when the actual degree of compliance does not justify a low control risk assessment 
B) low control risk when the actual degree of compliance justifies a low control risk assessment 
C) high control risk when the actual degree of compliance would justify a lower control risk assessment 
D) high control risk when the actual degree of compliance would justify a higher control risk assessment

Question 12

Auditing a larger sample reduces the probability of determining that the control is working well when in fact it is not.

Accepted Answer

A) True 
 B)False

Question 13

An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps an auditor to ________.

Accepted Answer

A) minimize the failure to detect errors and irregularities 
B) eliminate the risk of nonsampling errors 
C) reduce the level of audit risk and materiality to a relatively low amount 
D) make a preliminary estimate of the appropriate sample size 
A) minimize the failure to detect errors and irregularities 
B) eliminate the risk of nonsampling errors 
C) reduce the level of audit risk and materiality to a relatively low amount 
D) make a preliminary estimate of the appropriate sample size

Question 14

An example of nonsampling risk is the selection of a random sample that is not representative of the population.

Accepted Answer

A) True 
 B)False

Question 15

Green CA 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 dollar unit sampling 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 16

Attribute sampling is audit sampling in which auditors look for the presence or absence of a control condition.

Accepted Answer

A) True 
 B)False

Question 17

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 18

Nonsampling risk exists in both statistical and nonstatistical sampling.

Accepted Answer

A) True 
 B)False

Question 19

In testing controls over invoices,an auditor discovers that in 10% of her statistical sample invoices were sent for full shipments,even if shipping documents suggested partial shipments.In this case,she would likely ________.

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 20

In making a decision about the extent of misstatement in a population,the known misstatement in the sample must be projected to the population.

Accepted Answer

A) True 
 B)False

Which of the following is an advantage of statistical sampling?

Which of the following is a term used to describe a departure from a prescribed internal control procedure?

The determination of an appropriate sample on a representative basis must be made using statistical methods.

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. )

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

The purpose of tests of controls is to determine whether ________.

Using the audit risk model: If audit risk is 0.05,inherent risk is 1.0,control risk is 0.20,and analytical procedures risk is 1.0,the risk of incorrect acceptance is 0.25.

The probability that an auditor's conclusion based on a sample might differ from the auditor's conclusion based on an audit of the entire population identifies the concept of ________.

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 acceptance.

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

The risk of assessing control risk too high is the risk that the evidence of compliance with control procedures in the sample indicates ________.

Auditing a larger sample reduces the probability of determining that the control is working well when in fact it is not.

An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps an auditor to ________.

An example of nonsampling risk is the selection of a random sample that is not representative of the population.

Attribute sampling is audit sampling in which auditors look for the presence or absence of a control condition.

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?

Nonsampling risk exists in both statistical and nonstatistical sampling.

In testing controls over invoices,an auditor discovers that in 10% of her statistical sample invoices were sent for full shipments,even if shipping documents suggested partial shipments.In this case,she would likely ________.

In making a decision about the extent of misstatement in a population,the known misstatement in the sample must be projected to the population.

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

hapter 15 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

Which of the following is an advantage of statistical sampling?

Which of the following is a term used to describe a departure from a prescribed internal control procedure?

The determination of an appropriate sample on a representative basis must be made using statistical methods.

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. )

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

The purpose of tests of controls is to determine whether ________.

Using the audit risk model: If audit risk is 0.05,inherent risk is 1.0,control risk is 0.20,and analytical procedures risk is 1.0,the risk of incorrect acceptance is 0.25.

The probability that an auditor's conclusion based on a sample might differ from the auditor's conclusion based on an audit of the entire population identifies the concept of ________.

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 acceptance.

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

The risk of assessing control risk too high is the risk that the evidence of compliance with control procedures in the sample indicates ________.

Auditing a larger sample reduces the probability of determining that the control is working well when in fact it is not.

An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps an auditor to ________.

An example of nonsampling risk is the selection of a random sample that is not representative of the population.

Attribute sampling is audit sampling in which auditors look for the presence or absence of a control condition.

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?

Nonsampling risk exists in both statistical and nonstatistical sampling.

In testing controls over invoices,an auditor discovers that in 10% of her statistical sample invoices were sent for full shipments,even if shipping documents suggested partial shipments.In this case,she would likely ________.

In making a decision about the extent of misstatement in a population,the known misstatement in the sample must be projected to the population.

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

hapter 15 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