Question 1

Nonstatistical sampling may be better to use than statistical sampling when ________.

Accepted Answer

A) the auditor has insufficient knowledge about the population to take a statistical sample 
B) the inherent risk of error in the population is low 
C) the population is known to be diverse,with a high inherent risk of error 
D) auditors are not technically proficient in sampling 
A) the auditor has insufficient knowledge about the population to take a statistical sample 
B) the inherent risk of error in the population is low 
C) the population is known to be diverse,with a high inherent risk of error 
D) auditors are not technically proficient in sampling

Question 2

In specifying the objectives for substantive testing of accounts receivable,an auditor hypothesizes that the company does not have a right to collect the money,and looks for evidence that they do.

Accepted Answer

A) True 
 B)False

Question 3

When evaluating the results of substantive audit procedures,auditors run the sampling risk(s)of ________.

Accepted Answer

A) assessing control risk too high or too low 
B) incorrect acceptance and incorrect rejection of the population 
C) assessing control risk too low only 
D) incorrect acceptance of the population only 
A) assessing control risk too high or too low 
B) incorrect acceptance and incorrect rejection of the population 
C) assessing control risk too low only 
D) incorrect acceptance of the population only

Question 4

The amount by which a projected likely misstatement differs from an actual misstatement is usually the result of ________.

Accepted Answer

A) a misunderstanding of accounting principles 
B) sampling error 
C) management override of an internal control procedure 
D) risk of incorrect acceptance 
A) a misunderstanding of accounting principles 
B) sampling error 
C) management override of an internal control procedure 
D) risk of incorrect acceptance

Question 5

Which description best illustrates sampling risk?

Accepted Answer

A) Applying audit procedures that are inappropriate for the audit objectives. 
B) Failing to recognize errors or deviations in the documents examined. 
C) Arriving at incorrect statistical conclusions because of computational errors. 
D) Choosing a sample that does not represent the population. 
A) Applying audit procedures that are inappropriate for the audit objectives. 
B) Failing to recognize errors or deviations in the documents examined. 
C) Arriving at incorrect statistical conclusions because of computational errors. 
D) Choosing a sample that does not represent the population.

Question 6

The risk model is defined as AR = IR  CR  DR.The risk of assessing control risk too low can lead to ________.

Accepted Answer

A) the auditor performing more work than needed,thus wasting resources 
B) the auditor failing to do additional work that should be done 
C) poor choice of procedures 
D) expanding sample sizes required for statistical sampling of account balances 
A) the auditor performing more work than needed,thus wasting resources 
B) the auditor failing to do additional work that should be done 
C) poor choice of procedures 
D) expanding sample sizes required for statistical sampling of account balances

Question 7

Nonstatistical sampling is audit sampling in which auditors do not use the probability calculations to express the results.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is used in attribute sampling to determine the sample size?

Accepted Answer

A) Sampling risk,sample deviation rate,and tolerable deviation rate. 
B) Sampling risk,sample deviation rate,and expected population deviation rate. 
C) Sampling risk,tolerable deviation rate,and expected population deviation rate. 
D) Sample deviation rate,tolerable deviation rate,and expected population deviation rate. 
A) Sampling risk,sample deviation rate,and tolerable deviation rate. 
B) Sampling risk,sample deviation rate,and expected population deviation rate. 
C) Sampling risk,tolerable deviation rate,and expected population deviation rate. 
D) Sample deviation rate,tolerable deviation rate,and expected population deviation rate.

Question 9

A number of factors can affect the size of a sample for a substantive audit of the details of an account balance.All other factors being equal,which of the following would lead to a larger sample size?

Accepted Answer

A) A lower assessed level of control risk. 
B) Using a larger number of effective analytical procedures to obtain evidence about particular assertions. 
C) Smaller expected frequency of account item errors. 
D) Smaller measure of tolerable misstatement. 
A) A lower assessed level of control risk. 
B) Using a larger number of effective analytical procedures to obtain evidence about particular assertions. 
C) Smaller expected frequency of account item errors. 
D) Smaller measure of tolerable misstatement.

Question 10

The standard deviation of a population of data is a statistical measure of ________.

Accepted Answer

A) how much data are skewed 
B) how much data are correlated 
C) the dispersion of data 
D) the average value of data items 
A) how much data are skewed 
B) how much data are correlated 
C) the dispersion of data 
D) the average value of data items

Question 11

Assume several auditors selected various unrestricted,unstratified random samples from a population of 1,200 customers' accounts receivable with a recorded value of $480,000.The results of their tests are shown in the table below.
Projected Likely Misstatement
Overstatement (Understatement)
Required:
For each of the sample sizes,calculate the projected likely misstatement (PLM)using (1)average difference method,and (2)the Dollar Unit Sample method.Treat each case independently.Round the PLM solutions to the nearest dollar.

Accepted Answer

Projected Likely Mis

Question 12

Sampling risk is the risk that the sample does not represent the population.

Accepted Answer

A) True 
 B)False

Question 13

The sample deviation rate is the best single-point estimate of the actual,but unknown,deviation rate in the population.

Accepted Answer

A) True 
 B)False

Question 14

.Using the audit risk model,answer the following questions.
Required:
A)What is the risk of incorrect acceptance for Jack and for Jill?
B)Based on your answer in part (A),which auditor will have to collect the most evidence? Explain your reasoning.
C)What effect does differing assessments of control risk have on the sample size of accounts receivable? Explain.

Accepted Answer

A)Using the audit risk model,the risk of

Question 15

Detection risk is the risk that the auditor will not detect material misstatements in the accounts.To limit detection risk to an acceptable level,the auditor ________.

Accepted Answer

A) performs substantive tests 
B) tests controls 
C) gains an understanding of the internal control system 
D) applies statistical methods 
A) performs substantive tests 
B) tests controls 
C) gains an understanding of the internal control system 
D) applies statistical methods

Question 16

When auditors perform procedures using statistical sampling and obtain sufficient evidence,a conclusion about the population characteristics will not be wrong.

Accepted Answer

A) True 
 B)False

Question 17

the risk of incorrect acceptance (RIA).Which of the following is true about RIR and RIA?

Accepted Answer

A) RIR is of greater concern to the auditor than the RIA. 
B) RIA is of greater concern to the auditor than the RIR. 
C) RIA and the RIR are of equal importance to the auditor. 
D) Neither the RIR nor the RIA need be considered by the auditor. 
A) RIR is of greater concern to the auditor than the RIA. 
B) RIA is of greater concern to the auditor than the RIR. 
C) RIA and the RIR are of equal importance to the auditor. 
D) Neither the RIR nor the RIA need be considered by the auditor.

Question 18

If the association of population items with random numbers is difficult and expensive,but the auditor does not have sufficient knowledge about the population,the auditor should ________.

Accepted Answer

A) use nonstatistical sampling 
B) use statistical sampling 
C) use a computer to analyze the population and then decide which method to use 
D) first determine the possible impacts of an error in the population on the financial statements to decide if sampling is reasonable 
A) use nonstatistical sampling 
B) use statistical sampling 
C) use a computer to analyze the population and then decide which method to use 
D) first determine the possible impacts of an error in the population on the financial statements to decide if sampling is reasonable

Question 19

Left and Right PAs audited the accounts receivable of Investo Limited on a sample basis.There were 2,000 customer accounts in the subsidiary ledger with a total recorded value of $375,000.As part of the audit program,Left and Right selected a sample of 100 accounts having a recorded value of $20,000.They performed the audit procedures and determined that the audited amount of the sample totalled $19,000.
Required:
A)Calculate the projected likely misstatement (PLM)using (1)the average difference method and (2)the ratio method.
B)Evaluate the results of the calculation in part (A).Assume that Left and Right set the tolerable misstatement for accounts receivable at $25,000.

Accepted Answer

A)(1)Average difference met HYPERLINK ""

Question 20

Which of the following audit procedures is NOT typically used in audit sampling applications?

Accepted Answer

A) Observation of personnel and procedures. 
B) Physical count of tangible assets. 
C) Recalculation. 
D) Confirmation. 
A) Observation of personnel and procedures. 
B) Physical count of tangible assets. 
C) Recalculation. 
D) Confirmation.

Nonstatistical sampling may be better to use than statistical sampling when ________.

In specifying the objectives for substantive testing of accounts receivable,an auditor hypothesizes that the company does not have a right to collect the money,and looks for evidence that they do.

When evaluating the results of substantive audit procedures,auditors run the sampling risk(s)of ________.

The amount by which a projected likely misstatement differs from an actual misstatement is usually the result of ________.

Which description best illustrates sampling risk?

The risk model is defined as AR = IR  CR  DR.The risk of assessing control risk too low can lead to ________.

Nonstatistical sampling is audit sampling in which auditors do not use the probability calculations to express the results.

Which of the following is used in attribute sampling to determine the sample size?

A number of factors can affect the size of a sample for a substantive audit of the details of an account balance.All other factors being equal,which of the following would lead to a larger sample size?

The standard deviation of a population of data is a statistical measure of ________.

Sampling risk is the risk that the sample does not represent the population.

The sample deviation rate is the best single-point estimate of the actual,but unknown,deviation rate in the population.

Detection risk is the risk that the auditor will not detect material misstatements in the accounts.To limit detection risk to an acceptable level,the auditor ________.

When auditors perform procedures using statistical sampling and obtain sufficient evidence,a conclusion about the population characteristics will not be wrong.

the risk of incorrect acceptance (RIA).Which of the following is true about RIR and RIA?

If the association of population items with random numbers is difficult and expensive,but the auditor does not have sufficient knowledge about the population,the auditor should ________.

Which of the following audit procedures is NOT typically used in audit sampling applications?

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

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Exam 10: Audit Sampling

Nonstatistical sampling may be better to use than statistical sampling when ________.

In specifying the objectives for substantive testing of accounts receivable,an auditor hypothesizes that the company does not have a right to collect the money,and looks for evidence that they do.

When evaluating the results of substantive audit procedures,auditors run the sampling risk(s)of ________.

The amount by which a projected likely misstatement differs from an actual misstatement is usually the result of ________.

Which description best illustrates sampling risk?

The risk model is defined as AR = IR  CR  DR.The risk of assessing control risk too low can lead to ________.

Nonstatistical sampling is audit sampling in which auditors do not use the probability calculations to express the results.

Which of the following is used in attribute sampling to determine the sample size?

A number of factors can affect the size of a sample for a substantive audit of the details of an account balance.All other factors being equal,which of the following would lead to a larger sample size?

The standard deviation of a population of data is a statistical measure of ________.

Sampling risk is the risk that the sample does not represent the population.

The sample deviation rate is the best single-point estimate of the actual,but unknown,deviation rate in the population.

Detection risk is the risk that the auditor will not detect material misstatements in the accounts.To limit detection risk to an acceptable level,the auditor ________.

When auditors perform procedures using statistical sampling and obtain sufficient evidence,a conclusion about the population characteristics will not be wrong.

the risk of incorrect acceptance (RIA).Which of the following is true about RIR and RIA?

If the association of population items with random numbers is difficult and expensive,but the auditor does not have sufficient knowledge about the population,the auditor should ________.

Which of the following audit procedures is NOT typically used in audit sampling applications?

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