1.

A purpose of test of controls is to provide reasonable assurance that the control procedures are
being applied as prescribed the sampling method that is most useful when testing controls is
A. Non-statistical sampling.
B. Attribute estimation.
C. Unrestricted random sampling.
D. Stratified random sampling.

2. The rate of occurrence in the attribute sampling plan refers to:

A. The number of errors that can be reasonably expected to be found in a population.
B. The frequency with which a certain characteristic occurs within a population.
C. The acceptable risk that the sample is not representative of the population.
D. The peso range within which the true population total can be expected to fall.

3. The deviation rate the auditor expects to find in the population, before testing begins, is called
the
A. Tolerable deviation rate.
B. Sample deviation rate.
C. Computed upper deviation rate.
D. Estimated population deviation rate.

4. The deviation rate the auditor will permit in the population and still be willing to reduce the
assessed level of control risk is called the
A. Tolerable deviation rate.
B. Estimated population rate.
C. Acceptable risk of over-reliance.
D. Sample deviation rate.

5. Establishing the tolerable deviation rate (TDR) requires

A. Statistical frequency probability tables.
B. Random number tables.
C. A computer program.
D. Auditor judgment.

6. The tolerable rate of deviations for a compliance test is generally

A. Lower than the expected rate of errors in the related accounting records.
B. Higher than the expected rate of errors in the related accounting records.
C. Identical to the expected rate of errors in the related accounting records.
D. Unrelated to the expected rate of errors in the related accounting records.

7. The tolerable rate of deviation for tests of controls necessary to justify a control risk
assessment depends primarily on which of the following?
A. The cause of errors.
B. The extent of reliance to be placed on the procedures.
C. The amount of any substantive errors.
D. The limit used in audits of similar clients.

8. The risk which the auditor is willing to take of accepting a control as being effective when it is
not, is the
A. Tolerable deviation rate.
B. Acceptable risk of over-reliance.
C. Estimated population deviation rate.
D. Finite correction factor.

9. Which of the following factors is (are) considered in determining the sample size for a test of
controls?
I. Expected Deviation Rate
II. Tolerable Deviation Rate
A. Both I and II
B. Neither I nor II
C. II
D. I

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 10. Which of the following statements is correct concerning statistical sampling in tests of
controls?
A. The expected population deviation rate has little or no effect on determining sample size
except for very small populations.
B. As the population size doubles, the sample size also should double.
C. For a given tolerable rate, a larger sample size should be selected as the expected
population deviation rate decreases.
D. The population size has little or no effect on determining sample size except for a very
small population.

11. Which of the following combinations results in a decrease in sample size for attributes?

Allowable Risk of Tolerable Deviation Expected Population

Assessing Control Rate Deviation Rate
Risk Too Low
A. Increase Decrease Increase
B. Decrease Increase Decrease
C. Increase Increase Decrease
D. Increase Increase Increase

12. In planning a statistical sample for a test of controls, an auditor increased the expected
population deviation rate from the prior year’s rate because of the results of the prior year’s
tests of controls and the overall control environment. The auditor most likely would then
increase the planned:
A. Tolerable rate.
B. Allowance for sampling risk.
C. Risk of assessing control risk too low.
D. Sample size.

13. An auditor is testing internal control procedures that are evidences on an entity’s vouchers by
matching random numbers with voucher numbers. If a random number matches the number of
a voided voucher, the voucher should ordinarily be replaced by another voucher in the random
sample if the voucher
A. Constitutes deviation.
B. Has been properly voided.
C. Cannot be located.
D. Represents an immaterial peso amount.

14. An auditor plans to examine a sample of 20 purchase orders for proper approvals as prescribed
by the client’s internal control procedures. One of the purchase orders in the chosen sample of
20 cannot be found, and the auditor is unable to use alternative procedures to test whether
that purchase order was properly approved. The auditor should
A. Choose another purchase order to replace the missing purchase order in the sample.
B. Consider this test of control invalid and proceed with substantive tests since internal
control cannot be relied upon.
C. Treat the missing purchase order as a deviation for the sample.
D. Select a completely new set of 20 purchase orders.

15. The sample deviation rate equals

A. The number of deviation in the population divided by the sample size.
B. The number of deviations in the sample divided by the sample size.
C. The number of deviations in the population divided by the population size.
D. The number of items in the population multiplied by the number of deviations in the
sample.

16. When assessing the tolerable rate, the auditor should consider that, while deviations from
control procedures increase the risk of material misstatements, such deviations do not
necessarily result in errors. This explains why
A. A recorded disbursement that does not show evidence of required approval may
nevertheless be a transaction that is properly authorized and recorded.
B. Deviation would result in errors in the accounting records only if the deviations and the
errors occurred on different transactions.

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 C. Deviations from pertinent control procedures at a given rate ordinarily would be expected
to result in errors at a higher rate.
D. A recorded disbursement that is properly authorized may nevertheless be a transaction
that contains a material error.

17. When using statistical sampling for tests of controls, an auditor’s evaluation would include a
statistical conclusion concerning whether:
A. Deviations in the population were within an acceptable range.
B. Monetary precision is in excess of a certain predetermined amount.
C. The population’s total monetary value is not in error by more than a fixed amount.
D. Population characteristics occur at least once in the population.

18. What is an auditor’s evaluation of a statistical sample for attributes when a test of 100
documents results in 4 deviations if tolerable rate is 5%, the expected population deviation
rate is 3%, and the allowance for sampling risk is 2%?
A. Accept the sample results as support for planned reliance on the control because the
tolerable rate less the allowance for sampling risk equals the expected population
deviation rate.
B. Modify planned reliance on the control because the sample deviation plus the allowance
for sampling risk exceeds the tolerable rate.
C. Modify planned reliance on the control because the tolerable rate plus the allowance for
sampling risks exceeds the expected population deviation rate.
D. Accept the sample results as support for planned reliance on the control because the
sample deviation rate plus the allowance for sampling risk exceeds the tolerable rate.

19. In addition to evaluating the frequency of deviations in tests of controls, an auditor also
considers certain qualitative aspects of the deviations. The auditor most likely will give broader
consideration to the implications of a deviation if it is
A. The only deviation discovered in the sample.
B. Identical to a deviation discovered during the prior year’s audit.
C. Caused by an employee’s misunderstanding of instructions.
D. Initially concealed by a forged document.

20. The final step in the evaluation of the audit results in tests of controls is the decision to:
A. Determine the error in each sample.
B. Determine sampling error and calculate the estimated total population error.
C. Project the point estimate.
D. Conclude whether the control tested is effective or is not effective.

21. In applying variables sampling, an auditor attempts to:

A. Estimate a qualitative characteristic of interest.
B. Determine various rates of occurrence for specified attributes.
C. Discover at least one instance of a critical deviation.
D. Predict a monetary population value within a range of precision.

22. The misstatement the auditor expects to find in the population, before testing begins, is called
the
A. Tolerable misstatement.
B. Sample misstatement.
C. Projected misstatement.
D. Anticipated misstatement.

23. Tolerable error is a measure of the maximum monetary error that may exist in an account
balance without causing the financial statements to be materially misstated, and is directly
related to:
A. Reliability of evidence.
B. Audit risk.
C. Materiality.
D. Cost-benefit analysis.

24. The risk which the auditor is willing to take of accepting a balance as correct when the true
error in the balance is equal to or greater than the tolerable misstatement is

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 A. The upper bound.
B. The acceptable risk of incorrect acceptance.
C. The tolerable risk.
D. The lower bound.

25. The relationship between sample size and the allowance for risk of incorrect acceptance is
A. Direct
B. Variable
C. Inverse
D. Indeterminate

26. Which of the following sample planning factors would influence the sample size for a
substantive test of details for a specific account?
I. Expected amount of misstatements
II. Measure of tolerable misstatement
A. I
B. Both I and II
C. II
D. Neither I nor II

27. A number of factors influence the sample size for a substantive test of details of an account
balance. All other factors being equal, which of the following would lead to a larger sample
size?
A. Greater reliance on internal controls.
B. Greater reliance on analytical procedures.
C. Smaller expected frequency of errors.
D. Smaller measure of tolerable misstatement.

28. 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 Increase in assessed
misstatement level of control risk
A. Increase Increase
B. Increase Decrease
C. Decrease Increase
D. Decrease Decrease

29. Should errors in the sample be projected to the population?

A. Yes, because projection of errors is required by generally accepted accounting standards.
B. No, because the sample misstatement is equal to the total misstatement.
C. Yes, because the misstatement in the sample is not necessarily the total misstatement.
D. No, because the sample misstatement is larger than the total misstatement.

30. An auditor is evaluating the results of a variables sampling plan. Which of the following is
relevant to the auditor’s judgment about the sample?
A. Nature and cause of the errors.
B. The effects of sampling risk.
C. Qualitative information that lends insight into errors found.
D. All of these are relevant.

31. The final step in the evaluation of the audit results in substantive tests is the decision to:
A. Accept the population as fairly stated or to require further action.
B. Determine sampling error and calculate the estimated total population error.
C. Project the point estimate.
D. Determine the error in each sample.

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