4. Select the " Use any one of the Use any one of the tiple Choice Quest : following techniques ‘ : sample following wet tds the 1, Which of the following constitutes audit sampling? selection population: a, Selecting and examining specific items to determine « Sytmatc etion —* Rando number whether ot not a particular procedure is being performed. + Haphazard selection b, Examining items to obtain information about matters such selection (applies only * Systematic selection as the cl business, the nature of transactions, ‘to nonstatisical += *-Haphazard accounting and internal control systems, sampling) selection (applies onky to c. Examining items whose values exceed a certain amount non-staistical sampling) 30 as to verify a large proportion of the total amount of © Value weighted selection an account balance or class of transactions. d. Applying audit procedures to less than 100% of items i i ithin an account balance or class of transactions such 5. the — Apply the audit Apply the audit a i " cs ae procedures totkw procedures to the that all sampling units have a chance of selection. Procedures sample items. sample items. | 2. When designing audit procedures, the auditor should determine the appropriate means of selecting items for testing The means available to the auditor would include: . 100% sicaminati a ee oe YES 6. Evaluate . Decide whether the Decide whether to the sample results supported the accept account balance. results planned degree of /—_as fairly stated or to : : t a. YES YES reliace on intemal require further actions b NO YES NO control. © NO YES : YES a. NO NO ‘YES 3. This involves the application of the procedures to-less than 100% of the items within an account balance or.class of ‘tansactions. This enables the auditor to obtain and evaluate ” audit evidence about some characteristics of the selected items . in order to form an opinion about the characteristics of all the items supporting an account balance or transaction class a. Audit techniques b Audit sampling © Sclective testing 4. Specific identificationw “The auditors principal objective when using a sample of te, of details of balances is whether the: . e. account balance being audited is fairly stated. transactions being audited are free of misstatements, controls being tested are operating effectively. transactions and account balances being audited are fairly stated. por ‘Audit sampling for substantive tests is appropriate when a. Analytical procedures are used b. The auditor wants to eliminate sampling risks cc. A population contains small number of large value d. Tests of details are performed Audit sampling for test of control is generally appropriate when 2. control leaves evidence of performance b. control leaves no evidence of performance ©. 100 % of the transactions is tested d. examining specific high value items in the population Ina sampling application, the group of items about which the auditor wants to estimate some characteristic is called the a. Population c. Attribute of interest b. Sample 4. Sampling unit An error that arises from an isolated event that has not recurred other than on specifically identifiable occasions and is therefore Not representative of errors in’ the population. a. tolerable error sampling exror b. non-sampling error d. anomalous exror ‘The possibility that the auditor's conclusion based om 2 sample may be different from the conclusion reached if the eo Population were subjected to the same procedure is called a. Audit risk Sampling risk . Non-sampling risk d.. Detection xisk 390 Which of the following best illustrates the concept of sampling risk a. Arandomly chosen sample may not be representative of the population as a whole on the characteristies of interest b, An auditor may select audit procedure that are not approptiate to achieve the specific objective c. Anauditor may fail to recognize errors in the documents examined for chosen sample d. The documénts related to the chosen sample may not be available for inspection . One of the ways to reduce sampling tisk is to a. Increase the sample size. b. Carefully design the audit procedures to be used. ©. Provide proper supervision and instruction of the audit team. 4. Use variables sampling rather than attribute sampling. . Non-sampling errors occur when audit tests do not uncover existing exceptions in the 2. Population =” b. Planning stage «Sample 4. Financial statement ne of the causes of non-sampling error is failure to draw a random sample failure to draw a representative sample the use of inappropriate or ineffective audit procedures the use of attributes sampling instead of variables sampling Or a . c d, ~ One of the ways to control non-sampling ssk is through * Proper supervision and instruction of the client’s b fmployees. < Proper supervision and instruction of the audit team. * The use of attributes sampling rather than variables a sampling. " Control which ensure that the sample drawn is random and representative, 391saith » Audit procedures on the sample item will not vary . Which of the following is the risk ¢.__ Statistical sampling requires quantitative audit procedure “uncover existing exceptions in a sample? Sampling ‘tisk Nonsampling sk ‘Audit risk Detection risk Which of the following statements is most correct? a. A sample of all items of a population will eliminate sampling tsk, but increase nonsampling risk. b. The use of an appropriate ensures a representative c. The auditor’ failure to recognize an exception is a significant cause of sampling risk. 4d. The use of inappropriate audit procedures is a significant cause of nonsampling risk: bs - PSA’ 530 identifies two’ general approaches to audit sampling.” They are a. Random & nonrandom b. Statistical & nonstatistical c. Precision & reliability” d. Risk and nonrisk . Which of the following statements best expresses the impact that the performance of audit procedures has on statistical arid nonstitistical sampling? »\:1 ° v a> Audit procedutes on the sample item will vary as 2 #5 of using cither statistical or nonstatistical sampling: b._ Theaudit procedures will be the same for either statistic 6 Honstatistital Sampling but they must be petfotl differently for each. ‘whereas nonstatistical sampling requires judgmental procedures, ris series ju result of using either statistical or ponstatistical sa™P! that audit tests will noe | le selection technique. 20. a1. 22, we applies mathematical rules that allows audit coe sampling risk nuditors to quantify b. may use statistical selection techniques. ¢, reaches conclusion about the population on aj sample judgmental ‘4, does not allow measurement of sample reliability” ‘An advantage of using statistical sampling is.that such techniques 2. mathematically measure risk b. climinate the need for judgmental decision ¢. define the value of reliability necessary to provide audit assurance d._ have been established in the courts to be superior to nonstatistical sampling Which of the following statements is most correct about the quantification of sampling risk? 2. Sampling tisk cannot be quantified. b. Sampling risk can be quantified only when non-statistical __ selection techniques are used to select the sample. €. Sampling tisk can be quantified only when statistical selection techniques are used to select the sample: 4. None of the above. Statistical samples do not allow 2. More efficient samples b. Measurement of sample reliability ©, Replacement of the auditor's professional judgment 4. - Measurement of sample sisk . Statistical sampling cannot 2. Determine reliability of samples . b.. ., Select a sample to draw infereace about a population ©. Assure a sample will be representative of a population 4... Measure the risk that a sample is not representative ofa Population2a. 25. 26. 27. 28. A principal advantage of statistic methods of attribute, sampling over nonstatistcal methods is that they provide; scientific basis for éstablishing the: Fisk of assessing control Fisk too low: tolerable exception rate. expected population exception Fate. sample size. Which of the following sampling plans would be designed to vstimate a numerical measurement of a population such ag peso value? a. Numerical sampling b. Sampling for attributes c. Discovery sampling 4. Sampling for variables Which of the following sampling methods would be most appropriate in performing tests of controls over authorization of cash disbursements a. Attributes « b. Variables a. BO ee Ratio Steatified ‘There are many kinds of statistical estimates that an auditor may find useful, but basically every accounting estimate is ether of a quantity or of an error rate. The statistical terms that roughly cortespond to “quantities” and “error rate,” respectively, are: b, variables and attributes. ¢. constants and attributes. d. constants and variables. Attributes sampling would be an appropriate method to Use ae ah lode ec oga a. Review sales transactions for large and unreasonable amounts, Observe whether the duties of the accounts receivable cletk are separate from handling cash, Examine a sample of duplicate sales invoices for etedit approvai by the credit manager, Review the aged schedule of accounts receivable 19 ‘mine if receivables from officers are included. b. c. d. 2. 31. 32, sampling used for tests of details of balances provides results jo terms of 1. deviation rates. bi percentages. c. pesos. 4. expectation rates. 1fan auditor, planning to use statistical sampling, is concemed ‘with the number of a client’s sales invoices that contain vrathematical errors, the auditor would most likely utilize which sampling technique? Random sampling with replacement Sampling for attributes Sampling for variables Stratified random sampling aoe In assessing sample risk, alpha risks relate to the a. Efficiency of the audit b. Selection of the sample c. Effectiveness of the audit . Audit quality controls In performing substantive tests, the auditor is concerned with two risks or errors of sampling; the alpha exror and the beta error. 2. The alpha error is of greater concern to the auditor than. the beta error b.” ‘The beta error is of greater concer to the auditor than the alpha error ©. Thebeta error and the alpha error ate of equal importance to the auditor 4. Neither the alpha error nor the béta error need be considered by the auditor34. 35. aooe 36. 37. “ d.expected deviation rate representative of the Pope onduct multiple sample b. ¢. audit the entire population. d, use systematic sample selection. While performing a substantive test of details during an audi, While Pio determined that che sample results supported the the aso thatthe recorded account balance was mately cao rnred. Which of the following is the least Likely auditor reaction to this discovery? ; Perform expanded audit tests in the relevant areas Increase detection risk in the relevant areas Tnerease the sample size for test of control Take no action until tests of other audit areas are completed i aoee “The deviation tate the auditor will permit in the population sand stil be willing to reduce the assessed level of control ik | is called the ; tolerable deviation rate estimated population deviation rate | acceptable sampling risk sample deviation rate ‘The maximum amount of error in a population that _ is willing to accept is referred to as the 3 a. acceptable risk a al b. tolerable error ‘a c. expected error 4. tolerable materiality ‘The deviation rate the auditor is onsated pects to find in the before tenng begin i ealed he a. tolerable deviation rate b. sample deviation rate €. computed upper deviation rate 138. WIN mple deviation rate, SE eae te Achieved upper precision limit. ., oe Computed deviation rate. {Tolerable deviation rate 49. The tolerable sate of deviations for tests of controisis generally: 4g. lower than the expected rate of deviation. b. higher than the expected tate of deviation. ¢. identical to the expected rate of 4. unrelated to the expected sate of devia 40, Which of the following factors is geieilly nt cdnsidered. in determining sample size for a test of ‘controls? a. Population size : b. Tolerable rate situa ak.toq c. Risk of assessing control risk too low d. Expected population:deviation rate 4. The relationship between sample size and the allowable sampling tisk is a... Direct soe Variable, b. Inverse ... Indeterminate 42. If an auditor desires a greater level of assurance in auditing a balance, the acceptable risk of incotrect, acceptance: is reduced. is increased. «isnot changed. may be reduced ‘or increased circumstances. ao oP igjending spon other 45. ‘The toletable rate’ of deviation for tests to justify a contiol risk assessment depends primarily on which of the following?” °°“ arent: a.” “the ‘cause of errors” . b.--“the extent of reliance to be placed on the procedures ce:the amount of any substantive more ©! 4. the limit used in audits of sinilar clients 49746. 47. influence the sample size for a substantive + factors being fi ample expected fr Smaller measure of tolerable mis the following does not have to be considered in sample size of a test of details? tement correct rejection of U How would increases in tolerable misstatement and assessed level of control risk affect the sample size in a substantive test of details? Increase in tolerable — Tnerease in assessed level of misstatement control risk a. Incréase Increase b. Increase Decrease © Decrease Increase a Decrease Decrease Which of the following combinations results in’a decrease it sample size for attributes? = Decrease Increase e Decrease Tnctease Deerease c Increase Increase Decrease . Tnerease Inctease Increase ¢ following would have the least impact in sample size for tests of controls? ulation exception rate. control tisk too low, rate, | 48. ample size fora teat of controls, an auditor expected rate of deviations, the allowable tisk, and the Risk of incorrect acceptance Nature and cause of deviations Population size pore ge 50. As the amount of misstatements expected in the population approaches tolerable misstatement, the planned sample size will: a. decrease. b. increase. ¢. vary based on characteristics of the population. 4. be unaffected. 51. Which of the following statements is correct concernin; statistical sampling in tests of controls? 2 4. The population size has litle or no effect on determining sample size except for very small populations. b. The expected population deviation rite has litle or 0 effect on determining sample size except for very small Populations. © As the population size doubles, the sample size also should double. For a given tolerable rate, a larger sample size should be selected as the expected population deviation rate decreases.52. 53. 4. 55. nasa i {bor Ae» Haphazard ee 4 b. Random number ne ana 56. iraceepublevaitsnkisinernses acceptable tisk of income acceptance should be: a. increased. b. reduced. c. unaffected. d. Modified “To determine an optimum sample size when sampling method are used in a substantive test, all of the following factors be considered except the : vette a. Variance in the population b. Risk levels the auditor is willing to accept i c._ Deviation occurrence.tate the auditor expects to-find! the population oth d. Tolerable misstatement ‘Which of the following results in a larger sample a. decrease the desired confidence level and. decrease the tolerable deviation rate i J b. , increase the desired confidence level and, decrease the tolerable deviation rate Tien b c. decrease the desired confidence level and increase the tolerable deviation rate d.., increase the desired confidence level: and increase. Be tolerable deviation, rate eed i Principal methods of sampling selection include all of A sample ones every possible combination of items 0 a ulation has a chance of constituting the sample is # >. Representative sample Gs statistical b. random sample 57. 58. 59. 60. 61, Correspondence is established between the random number table and the population by: a. identifying each item in the population with a unique number, deciding the number of digits to use in the random number table and their association with the population numbering system. c defining which digits the auditor uses ia a column and the method of reading the table. d._ selecting a random starting point on the table. When auditors wish to evaluate a sample statistically, an acceptable selection method is: a. systematic sample selection. b. judgmental selection. c. haphazard selection. d. block sample selection. Which of the following statements regarding block sampling is least likely to be true? a. Block sampling is the selection of several items in sequence. b. It is acceptable to use block sampling for tests of transactions only if reasonable mimber of blocks is used. ¢. Only one block should be selected to increase the ~ probability of a representative sample. 4. Once the first item in the block is selected, the remainder of the block-is chosen automatically: ‘The process which requires the calculation of an interval and then selects the items based on the size of the interval is 2, statistical sampling c. random selection, b. systematic selection 4. computerized selection” In systematic sample lec ion, the population size is divided ys imple selection, the pop A by the number of sample items desired in order to determine e: : a. sampling interval. a b. tolerable deviation rate. ©: computed upper deviations tate. a. mean. poe62. 63. 64, . A method of sampling in which all the items in the poP' : aystematic sample selection is that ‘The advantage of it i to use. 7 7 b vue is imited possbility of it being biased. : seis unnecessary to determine ifthe population is domly. : : a say dec Heme mate 0 he Gn statements. When the auditor goes through a population aind selects items, without regard to their size, source, or other distinguishing characteristics, itis called: i a. block sample selection ‘ b. haphazard selection c. systematic sample- selection statistical selection. Tn examining cash disbursements, an auditor plans to chooses sample using systematic selection with a random start. The primary advantage of such a systematic selection is population items a. that include irregularities will not be overlooked whet” the auditor exercises compatible reciprocal options ; b. muy occur in a systematic patter, thus making the say mote representative 4 €. may occur more than once in a sample q 4. donothave to be prenumbered in order for the auditor use the technique 4 are divided into two ot more sub-population is 4. variable sampling 'b. stratified sampling ©. attribute sampli 4. divisible amet In statistical sampling methods used in substantive testing, an auditor most likely would stratify a population into meaningful coups if , BOvH alue-weighted sampling is used. : b. The population has, highly variable recorded amounts. ¢. Theauditor’s estimated tolerable misstatement is extremely small. 4d. The standard deviation of recorded amounts is relatively small. tes 66. 67. What is the primary objective of using stratification as a sampling method in auditing? a. To increase the confidence level at which a decision will be reached from the results of the sample selected. b. Jodetermine the occurrence rate for a given characteristic in the population being studied. c. To decrease the effect of variance in the total population. 4. To determine the precision range of the sample selected. 68. Which of the following statistical selection techniques is least desirable for use by an auditor? a. Systematic selection b. Block selection ©. Stratified selection d.- Sequential selection §. An auditor is testing internal control procedures that are evidenced on an entity's vouchers by matching random . ‘Sumbers with voucher aumbers. If a random number matches the number ofa voided voucher, that voucher ordinarily should be replaced by another voucher in the random sample if the voucher. 4. Constitutes a deviation b. Cannot be located © Has been properly voided 4. Represents an immaterial peso amount