Exam 15: Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Which of the following would have the least impact in determining sample size for tests of controls?

The process which requires the calculation of an interval and then selects the items based on the size of the interval is:

When the computed upper exception rate is greater than the tolerable exception rate in attributes sampling, one possible appropriate course of action is to increase sample size.

The exception rate the auditor will permit in the population and still be willing to reduce the assessed level of control risk is called the:

It is equally acceptable under professional auditing standards for auditors to use either statistical or nonstatistical sampling methods.

When the auditor goes through a population and selects items using nonprobalistic selection methods, without regard to their size, source, or other distinguishing characteristics, it is called:

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

If an auditor, planning to use statistical sampling, is concerned with the number of a client's sales invoices that contain mathematical errors, the auditor would most likely utilize which sampling technique?

Explain the effect on sample size of increasing each of the following: (1) tolerable exception rate, (2) estimated population exception rate, (3) acceptable risk of assessing control risk too low, and (4) population size.

In the evaluation of the results of an attributes sample, the fact that the exception rate in the sample was 2% rather than the estimated population exception rate of 4% would cause the computed upper exception rate to:

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

The auditor may estimate the "estimated population exception rate" by taking a small preliminary sample from the current year's data or by using the prior year's experience with the client.

Tolerable exception rate (TER) is inversely related to sample size.

It is virtually impossible to reduce sampling risk to zero.

When deciding on the acceptable risk of assessing control risk too low, the auditor needs to:

You are testing controls over accounts receivable and are determining if the appropriate credit authorization was made by an authorized person. Your sample size is 40 and your computed upper deviation rate is 5%. On the first 10 items sampled you have found 8 deviations. You would most likely:

You are determining the appropriate sample size to test accounts receivable. What three factors are the most important to consider?