Question 1

Which of the following situations will result in the auditors concluding that the risk of material misstatement is too high when using nonstatistical sampling for substantive tests?

Accepted Answer

A) The projected misstatement exceeds the tolerable misstatement. 
B) The allowance for sampling risk exceeds the projected misstatement. 
C) The risk of incorrect acceptance exceeds the risk of incorrect rejection. 
D) The tolerable misstatement exceeds the sample net misstatement.

Question 2

Which of the following types of risk is of critical importance to auditors in performing tests of controls?

Accepted Answer

A) The risk of assessing control risk too low. 
B) The risk of assessing control risk too high. 
C) The risk of incorrect acceptance. 
D) The risk of incorrect rejection.

Question 3

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 the 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 4

Auditors have a variety of sampling approaches available.For each approach in the first column,identify the correct statement in the second column.Each statement may be used once,more than once,or not at all.
-Probability-proportional-to-size sampling.

Accepted Answer

A) A method that is most effective in circumstances in which auditors expect a very low rate of occurrence of some critical deviation (e.g. ,a fraudulent cash disbursement). 
B) A classical method that uses both the audited and book values of items in the sample to obtain an estimated total audited value. 
C) The most frequently used general method that arrives at an estimated deviation rate. 
D) A method that defines the sampling unit as each individual dollar. 
E) A classical variables sampling plan enabling the auditors to estimate the average dollar value (or other variable)of items in a population by determining the average value of items in a sample.

Question 5

When using a statistical sampling plan,the auditors would probably require a smaller sample if the:

Accepted Answer

A) Population increases. 
B) Tolerable misstatement decreases. 
C) Desired risk of incorrect acceptance increases. 
D) Expected deviation rate increases.

Question 6

The 3,000 accounts receivable of DEF Company have a total book value of $60,000.Bob Smith,CPA,has selected and audited a sample of 100 accounts with a total book value of $2,100.Using the difference estimation technique,Smith has properly estimated a projected misstatement of a $9,000 overstatement for the entire population.The estimated total audited value of the population is:

Accepted Answer

A) $51,000 
B) $58,000 
C) $60,000 
D) $69,000

Question 7

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 8

Auditors have a variety of sampling approaches available.For each approach in the first column,identify the correct statement in the second column.Each statement may be used once,more than once,or not at all.
-Attributes sampling.

Accepted Answer

A) A method that is most effective in circumstances in which auditors expect a very low rate of occurrence of some critical deviation (e.g. ,a fraudulent cash disbursement). 
B) A classical method that uses both the audited and book values of items in the sample to obtain an estimated total audited value. 
C) The most frequently used general method that arrives at an estimated deviation rate. 
D) A method that defines the sampling unit as each individual dollar. 
E) A classical variables sampling plan enabling the auditors to estimate the average dollar value (or other variable)of items in a population by determining the average value of items in a sample.

Question 9

The 1,000 accounts receivable of Baker Company have a total book value of $30,000 (Average book value = $30).Wendy Duffo,CPA,has selected and audited a sample of 50 accounts with the following mean values:
1.Book value of $29.00
2.Audited value of $29.50.
-What is the estimated total audited value using mean-per-unit sampling?

Accepted Answer

A) $29,000. 
B) $29,500. 
C) $30,500. 
D) $30,517.

Question 10

In performing a test of a control last year the auditors specified a tolerable deviation rate of X percent.This year the auditors have specified a tolerable rate of less than X percent.Assuming that all other factors remain the same,which of the following is true regarding the relationship between this year's sample size compared to last year's sample size?

Accepted Answer

A) This year's sample is larger than last year's sample. 
B) This year's sample is smaller than last year's sample. 
C) This year's sample is equal to last year's sample. 
D) This year's sample is indeterminate in relation to last year's sample.

Question 11

The 2,000 accounts receivable of ABC Company have a total book value of $40,000.Bob Rotter,CPA,has selected and audited a sample of 100 accounts with a total book value of $1,950.The audited value of the 100 accounts in the sample is $1,875.
-Using the ratio 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

Question 12

When the auditors have chosen to test a control,what relationship will the tolerable rate normally have when compared to the expected rate of deviations in the sample?

Accepted Answer

A) Exceed. 
B) Equal. 
C) Be less than. 
D) Indefinite.

Question 13

The 1,000 accounts receivable of Baker Company have a total book value of $30,000 (Average book value = $30).Wendy Duffo,CPA,has selected and audited a sample of 50 accounts with the following mean values:
1.Book value of $29.00
2.Audited value of $29.50.
-What is the estimated total audited value using difference estimation sampling?

Accepted Answer

A) $29,000. 
B) $29,500. 
C) $30,517. 
D) $30,500.

Question 14

Discovery sampling is equivalent to an attributes sampling plan with a very low deviation rate.

Accepted Answer

A) True 
 B)False

Question 15

The 4,000 accounts receivable of Miller Company have a total book value of $150,000.A CPA has selected and audited a sample of 100 accounts with a total book value of $3,700 and an audited value of $3,800.
-Using the mean-per-unit estimation technique,the estimated total audited value of the population is:

Accepted Answer

A) $150,000. 
B) $152,000. 
C) $154,000. 
D) $154,054.

Question 16

Assume a mean-per-unit estimation variables sampling application with a tolerable misstatement of $70,000 and a book value of $700,000.After performing the sampling plan,the auditors calculated an allowance for sampling risk of $45,000 and a point estimate of the population's total audited value to be $640,000.The projected misstatement based on this sample is:

Accepted Answer

A) $5,000 
B) $45,000 
C) $60,000 
D) $70,000

Question 17

Auditors have a variety of sampling approaches available.For each approach in the first column,identify the correct statement in the second column.Each statement may be used once,more than once,or not at all.
-Ratio estimation sampling.

Accepted Answer

A) A method that is most effective in circumstances in which auditors expect a very low rate of occurrence of some critical deviation (e.g. ,a fraudulent cash disbursement). 
B) A classical method that uses both the audited and book values of items in the sample to obtain an estimated total audited value. 
C) The most frequently used general method that arrives at an estimated deviation rate. 
D) A method that defines the sampling unit as each individual dollar. 
E) A classical variables sampling plan enabling the auditors to estimate the average dollar value (or other variable)of items in a population by determining the average value of items in a sample.

Question 18

Decreases in the estimated standard deviation have what effect on required sample size?

Accepted Answer

A) Increases. 
B) Decreases. 
C) No effect. 
D) Indeterminate.

Question 19

Which of the following best illustrates the concept of sampling risk?

Accepted Answer

A) A randomly chosen sample may not be representative of the population as a whole on the characteristic of interest. 
B) An auditor may select audit procedures that are not appropriate to achieve the specific objective. 
C) An auditor may fail to recognize deviations in the documents examined for the chosen sample. 
D) The documents related to the chosen sample may not be available for inspection.

Question 20

There are many kinds of statistical estimates that an auditor may find useful,but basically every statistical estimate in auditing is of either a quantity or of an error rate.The statistical terms that roughly correspond to "quantities" and "occurrence rate," respectively,are:

Accepted Answer

A) Attributes and variable. 
B) Variables and attributes. 
C) Constants and attributes. 
D) Constants and variables.

Exam 9: Audit Sampling