Statistical Sampling for Testing Control Procedures

Statistical Sampling for Testing Control Procedures

MULTIPLE CHOICE

1. Auditors who prefer statistical sampling to non-statistical

sampling may do so because statistical sampling helps the auditor

a. Measure the sufficiency of the evidential matter obtained. b.

Eliminate subjectivity in the evaluation of sampling results. c.
Reduce the level of tolerable error to a relatively low amount. d.
Minimize the failure to detect a material misstatement due to non-
sampling risk.

ANSWER: B

2. If all other factors in a sampling plan are held constant, changing

the measure of tolerable error to a smaller value would cause the
sample size to be:

a. Smaller. b. Larger. c. Unchanged. d. Indeterminate.

ANSWER: B

3. Which of the following sampling plans would be designed to

estimate a numerical measurement of a population, such as a
dollar value?

a. Numerical sampling. b. Discovery sampling. c. Sampling for

attributes. d. Sampling for variables.

ANSWER: D

4. Based on a random sample, it is estimated that four percent, plus

or minus two percent, of a firm's invoices contain errors. The plus or
minus two percent is known as the estimate's:
a. Precision. b. Accuracy. c. Confidence level. d. Standard error.

ANSWER: A

5. In order to quantify the risk that sample evidence leads to

erroneous conclusions about the sampled population

a. Each item in the sampled population must have an equal

chance of being selected. b. Each item in the sampled
population must have a chance of being selected proportional
to its book value. c. Each item in the sampled population must
have an equal or known probability of being selected. d. The
precise number of items in the population must be known.

ANSWER: C

6. Which of the following statements is not true regarding audit risk

assessment?

a. The auditor studies the business and industry and applies

analytical procedures as a basis for assessing inherent
risk.

b. When control risk and inherent risk are high, the auditor
increases detection risk to maintain overall audit risk at
the desired level.

c. The auditor studies and evaluates internal control policies

and procedures for assessing control risk.

d. The auditor designs substantive audit procedures to reduce

detection risk to an acceptable level.

ANSWER: B
7. Which of the following factors does an auditor generally need to
consider in planning a particular audit sample for a control test?

a. Number of items in the population. b. Total dollar amount of the

items to be sampled. c. Estimated standard deviation of the
population. d. Tolerable error.

ANSWER: D

8. Random numbers can be used to select a sample only when each

item in the population:

a. Can be assigned to a specific stratum. b. Is independent of

outside influence. c. Can be identified with a unique number. d. Is
expected to be within plus or minus three standard deviations of the
population mean.

ANSWER: C

9. The tolerable occurrence rate for a control test is generally

a. Lower than the expected occurrence rate in the related

accounting records. b. Higher than the expected occurrence rate in
the related accounting records. c. Identical to the expected
occurrence rate in the related accounting records. d. Unrelated to
the expected occurrence rate in the related accounting records.

ANSWER: B

10. An advantage of statistical over non-statistical sampling is that

statistical sampling:

a. Enables auditors to objectively measure the reliability of their

sample results. b. Permits use of a smaller sample size than would
be necessary with non-statistical sampling. c. Is compatible with a
wider variety of sample selection methods than is non-statistical
sampling. d. Allows auditors to inject their subjective judgment in
determining sample size and selection process in order to audit
items of greatest value and highest risk.

ANSWER: A

11. An auditor samples cash disbursement records for significant

errors of $5 or more. Upon finding one such error, these records are
scheduled for a complete review. This conclusion is most likely
based on a

a. Cluster sample. b. Discovery sample. c. Systematic sample. d.

Stratified sample.

ANSWER: B

12. Of the following statements, which one best differentiates

statistical sampling from nonstatistical sampling?

a. Statistical sampling is a mathematical approach to

inference, whereas nonstatistical sampling is a more
subjective approach.

b. Nonstatistical sampling has greater applicability to large

populations than does statistical sampling.

c. Nonstatistical sampling is more subjective, but produces

greater consistency in the application of audit judgment.

d. Nonstatistical sampling has greater applicability to

populations that lend themselves to random selection.

ANSWER: A

13. In examining cash disbursements, an auditor plans to choose a

sample using systematic selection with a random start. The
 primary advantage of such a systematic selection is that
population items

a. Which include errors will not be overlooked when the auditor

exercises compatible reciprocal options.

b. May occur in a systematic pattern, thus making the sample more

representative. c. May occur more than once in a sample. d. Do not
have to be prenumbered in order for the auditor to use the
technique.

ANSWER: D

14. When planning an attribute sampling application, the difference

between the expected occurrence rate and the tolerable occurrence
rate is the planned

a. Precision. b. Reliability. c. Dispersion. d. Skewness.

ANSWER: A

15. If certain forms are not consecutively numbered

a. Selection of a random sample probably is not possible. b.

Systematic sampling may be appropriate. c. Stratified sampling
should be used. d. Random number tables cannot be used.

ANSWER: B

16. In an attribute sampling application, holding other factors

constant, sample size will increase as which of the following
becomes smaller?

a. Reliability level. b. Population. c. Planned precision. d. Expected

rate of occurrence.

ANSWER: C
17. Which of the following sampling methods is most useful to
auditors when testing for internal control effectiveness?

a. Stratified random sampling. b. Attribute sampling. c. Variables

sampling. d. Unrestricted random sampling with replacement.

ANSWER: B

18. Attribute sampling, as applied to control testing, can assist the

auditor in several ways. Which of the following tasks
is not enhanced by sampling?

a. Determining the number of documents to examine in testing

for a specific attribute.

b. Selecting the documents to be tested.

c. Examining the documents.

d. Evaluating the sample results.

ANSWER: C

19. Which of the following is an element of sampling risk?

a. Choosing an audit procedure that is inconsistent with the audit

objective. b. Choosing a sample size that is too small to achieve the
sampling objective. c. Failing to detect an error on a document that
has been inspected by the auditor. d. Failing to perform audit
procedures that are required by the sampling plan.

ANSWER: B

20. Which of the following would not be an attribute of interest to

an auditor performing control tests?

a. Do selling prices agree with published price lists?

 b. Do purchased parts meet established quality standards?

c. Are proper labor rates being used to compute payroll?

d. Are account distributions (debits and credits) correct?

ANSWER: B

21. The precision limit for control testing necessary to justify

lowering the assessed control risk level depends primarily on which
of the following?

a. The cause of the errors. b. The materiality of the attribute(s) to

be tested. c. The amount of any substantive errors. d. The limit
used in audits of similar clients.

ANSWER: B