Question 1

Discuss each of the six possible courses of action the auditor can take when he or she has concluded that the population is misstated by more than a tolerable amount.

Accepted Answer

The answer of Discuss each of the six possible courses...

Question 2

The initial sample size is so-called because:

Accepted Answer

A)  the auditor must take several samples to ensure randomness. 
B)  there is always another sample to be done. 
C)  the deviations must be evaluated before deciding whether the sample is sufficiently large to achieve the objectives. 
D)  the auditor must take several samples to ensure that the final sample is representative of the population.

Question 3

The variables sampling method which generally results in smaller sample sizes than any other method is:

Accepted Answer

A)  monetary-unit sampling. 
B)  mean-per-unit estimation. 
C)  difference estimation. 
D)  ratio estimation.

Question 4

The auditor must consider the possibility that the true population misstatement is greater than the amount of misstatement that is tolerable when the auditor is performing:

Accepted Answer

A)  statistical sampling. 
B)  non-statistical sampling. 
C)  both A and B 
D)  none of the above

Question 5

Whenever a statistical method is used, a decision rule determines whether the population is acceptable.The decision rule for monetary-unit sampling is 'Accept the conclusion that the book value is NOT misstated by a material amount if:

Accepted Answer

A)  the overstatement tolerable misstatement amount falls between the lower and upper misstatement bounds.' 
B)  the upper misstatement bound falls between the understatement and overstatement tolerable misstatement amounts.' 
C)  both the understatement and overstatement tolerable misstatement amounts fall between the upper and lower misstatement bounds.' 
D)  both the lower and upper misstatement bounds falls between the understatement and overstatement tolerable misstatement amounts.'

Question 6

Difference estimation, ratio estimation, and mean-per-unit estimation are all techniques that constitute the general class of methods called:

Accepted Answer

A)  attributes sampling. 
B)  variables sampling. 
C)  block sampling. 
D)  monetary-unit sampling.

Question 7

Explain the steps involved in systematic sample selection.

Accepted Answer

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Question 8

The method used to measure the estimated total error amount in a population where there is both a recorded value and an audited value for each item in the sample is:

Accepted Answer

A)  mean-per-unit estimation. 
B)  ratio estimation. 
C)  monetary-unit sampling. 
D)  difference estimation.

Question 9

How can non-sampling risk be eliminated?

Accepted Answer

A)  proper supervision and instruction of the client's employees 
B)  controls which ensure that the sample drawn is random and representative 
C)  the use of attributes sampling rather than variables sampling 
D)  proper supervision and instruction of the audit team

Question 10

An auditor using non-statistical sampling cannot:

Accepted Answer

A)  determine a point estimate for the population. 
B)  mathematically measure the precision of the point estimate. 
C)  draw a random sample. 
D)  do any of the above.

Question 11

When a small preliminary sample is used to estimate the population deviation rate, the preliminary sample cannot be included in the ultimate sample.

Accepted Answer

A) True 
 B)False

Question 12

The risk which the auditor is willing to take in accepting a control as being effective when it is not is the:

Accepted Answer

A)  allowable risk of overreliance (ARO). 
B)  tolerable deviation rate (TDR). 
C)  estimated population deviation rate. 
D)  sample deviation rate (SDR).

Question 13

Which one of the following material occurrences would be most likely to attract the auditor's attention?

Accepted Answer

A)  deviations from client's established control procedures 
B)  monetary errors or irregularities in populations of account balance details 
C)  deviations from client's budgeted values 
D)  both A and B

Question 14

Directed sample selection is the selection of each item in the sample based on some judgement criteria established by the auditor.Discuss three commonly-used criteria.

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Question 15

Describe each of the four types of sample selection methods commonly associated with statistical audit sampling.

Accepted Answer

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Question 16

In systematic sample selection, the population size is divided by the number of sample items desired in order to determine the:

Accepted Answer

A)  interval. 
B)  mean. 
C)  computed upper exceptions rate. 
D)  tolerable exception rate.

Question 17

The most commonly used method of statistical sampling for tests of details of balances is:

Accepted Answer

A)  discovery sampling. 
B)  monetary-unit sampling. 
C)  variables sampling. 
D)  attributes sampling.

Question 18

If all other factors specified in a sampling plan remain constant, changing the estimated population deviation rate from 2% to 4% would cause the required sample size to:

Accepted Answer

A)  decrease. 
B)  remain the same. 
C)  increase. 
D)  become indeterminate.

Question 19

Explain the effect on sample size of increasing each of the following: tolerable deviation rate, estimated population deviation rate, acceptable risk of assessing control risk too low, and population size.

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Question 20

A sample in which every possible combination of items in the population has an equal chance of constituting the sample is a:

Accepted Answer

A)  statistical sample. 
B)  random sample. 
C)  representative sample. 
D)  judgement sample.

Exam 14: Audit sampling