No. 125 Brgy.

San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

AT.06.10 – Selecting Items for Testing and Audit Sampling

1. Which of the following means of testing is/are required to be performed by the

auditor for determining the extent and selecting items for testing?
a. 100% examination
b. Selecting specific items
c. Audit sampling
d. All of the above are required to be performed by the auditor.
e. None of the above is required, though all of these methods are allowed.

2. 100% examination is less likely to be used when performing:

a. Test of details
b. Test of controls
c. Both A and B
d. Neither A nor B

3. Which of the following means of selecting items for testing will most likely be used
by an auditor using CAATs?
a. 100% examination
b. Selecting specific items
c. Audit sampling
d. None of the above.

4. 100% examination may be appropriate when (choose the exception):

a. The population constitutes a small number of large value items.
b. The repetitive nature of a calculation or other process performed
automatically by an information system makes a 100% examination cost
effective.
c. There is a significant risk and other means do not provide sufficient
appropriate audit evidence.
d. Evidence from substantive analytical procedures is more persuasive than
that obtained from test of details.

5. Statement 1: One of the most common applications of testing specific items is for
testing high value or key items or those that have a history of error.
Statement 2: The results of audit procedures applied to items selected through
specific examination cannot be projected to the entire population because of
sampling risk.
a. True, True
b. True, False
c. False, True
d. False, False

6. What distinguishes audit sampling from specific examination?

a. The detection risk is higher than that of a complete (100%) testing.
b. Audit sampling is more suited for testing details of transactions.
c. In audit sampling, all units have a chance of being selected.
d. In audit sampling, all units have an equal chance or probability of being
selected.

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 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

7. It refers to an individual item constituting the set of data from which the auditor
wishes to draw conclusions. It may be physical items (documents, entries into the
accounting system, etc.) or monetary units.
a. Population
b. Sampling unit
c. Sampling risk
d. Stratum

8. Because of selection bias, conclusion reached from testing items selected in the
examination may only be projected into the population when using:
a. 100% examination
b. Specific examination
c. Audit sampling
d. All of the above.

9. It refers to the risk that the auditor’s conclusion based on a sample may be different
from the conclusion if the entire population were subjected to the same audit
procedure.
a. Sampling risk
b. Non-sampling risk
c. Confidence level
d. Risk of material misstatements

10. This is a sampling risk classification that affects the efficiency of the audit.
a. Type 1 or Alpha Risk
b. Type 2 or Beta Risk
c. Both A and B.
d. Neither A nor B.

11. Statement 1: When the true condition of controls does not support the preliminary
assessment of control risk that is less than high, and the auditor relies on the
controls tested, the auditor is exposed to the Type 2 Beta sampling risk for test of
controls.
Statement 2: Risks affecting audit effectiveness are of greater concern to the
auditor.
Statement 3: The possibility that the auditor concludes that a material
misstatement does not exist when in fact it does refers to the risk of incorrect
acceptance.
a. Only 1 statement is true.
b. Only 2 statements are true.
c. All of the statements are true.
d. None of the statements is true.

12. Under this method, audit effort is directed towards larger value items because they
have a greater chance of being selected.
a. Value-weighted selection
b. Random-number selection
c. Systematic selection
d. Haphazard selection

13. Statement 1: Non-sampling risk is a type of audit-related risk that cannot be

eliminated.

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 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

Statement 2: Management of non-sampling risk involves increasing the sample

size and using an appropriate selection method.
Statement 3: If the auditor wants to have a quantitative measure of sampling risk,
he/she should apply statistical sampling.
a. Only 1 statement is true.
b. Only 2 statements are true.
c. All of the statements are true.
d. None of the statements is true.

14. It refers to the rate of deviation from prescribed internal control procedure set by
the auditor in respect of which the auditor seeks to obtain an appropriate level of
assurance that is not exceeded by the actual rate of deviation.
a. Tolerable deviation rate
b. Expected deviation rate
c. Sample deviation rate
d. Population deviation rate

15. All of the following items have an inverse relationship with the sample size for test
of controls, except:
a. Tolerable deviation rate
b. Acceptable level of sampling risk
c. Assessed level of control risk
d. Expected deviation rate

16. If a voided, unused, or inapplicable document is selected as part of an auditor’s

sample for test of controls and these are properly treated according to internal
control policies and procedures, then the auditor:
a. Replaces the item.
b. Treats the item as a deviation.
c. Excludes the item from testing, effectively reducing the sample size.
d. Communicates the matter to the audit committee.

17. Statement 1: Anomalous error is 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.
Statement 2: If the sample deviation rate exceeds the auditor’s established
tolerable deviation rate, then control risk is to be assessed at maximum level.
Statement 3: If the expected deviation rate exceeds the auditor’s established
tolerable deviation rate, test of controls will not be performed.
a. Only 1 statement is true.
b. Only 2 statements are true.
c. All of the statements are true.
d. None of the statements is true.

18. One technique for attributes sampling is the use of a variable sample size. The
auditor establishes a relatively small initial sample size and examines additional
samples until he/she is satisfied that he/she was able to gather sufficient and
appropriate audit evidence for attributes sampling. This is called _________.
a. Sequential sampling
b. Discovery sampling
c. Classical attributes sampling
d. Classical variables sampling

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 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

19. When an auditor focuses on estimating numerical measurement of a population’s

misstatements rather than instances or frequency of occurrence, it is referred to
as a:
a. Attributes sampling plan
b. Variables sampling plan
c. Either A or B.
d. Neither A nor B.

20. An increase in the auditor’s required confidence level when performing variables
sampling would ________ the sample size.
a. Increase
b. Decrease
c. Increase or decrease
d. Cannot be determined

21. ______ is the process of dividing a population into sub-populations, each of which
is a group of sampling units which have similar characteristics, usually a range of
monetary value.
a. Projection
b. Stratification
c. Identification
d. Selection

22. In estimating the amount of material misstatements or actual value of a population

being audited, which of the following classical variables sampling is appropriate?
a. Ratio estimation
b. Difference estimation
c. Mean-per-unit estimation
d. All of the above may be used by the auditor.

23. Because value weighted selection targets larger value items for selection, this is
more commonly used in validating the ________ assertion.
a. Completeness
b. Existence/Occurrence
c. Accuracy
d. Presentation and disclosure

24. (For items 24-26) Mike, CPA, is performing test of controls on an audit client’s
three-way matching procedure for recording accounts payable. Mike’s audit
supervisor instructed him that the confidence level for the sampling procedure is
at 97%. Considering a population of 25,000 transactions for the audit period, Mike
obtained 150 transactions for attributes sampling. 15 of these transactions lack
one of the required documentation for three-way match. If Mike’s expected rate of
deviation based on experience is at 12%, what is Mike’s achieved upper precision
limit for the sampling procedure?
a. 9%
b. 10%
c. 13%
d. 15%

25. Before performing sample selection and sample examination, what is Mike’s
established tolerable rate of deviation for this attributes testing?
a. 9%

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JABELLAR/AIBAY/AJABINAL/RBERCASIO/JMAGLINAO/ASARMIENTO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

b. 10%
c. 13%
d. 15%

26. What is Mike’s evaluation of the audit client’s internal control procedures for three-
way matching of supporting documents related to accounts payable?
a. Effective, as the sample deviation rate of 10% (15/150) did not exceed the
allowance for sampling risk of 3% (100%-3%).
b. Effective, as the sample deviation rate of 10% (15/150) did not exceed the
achieved upper precision limit of 15%.
c. Ineffective, as the expected deviation rate of 12% exceeds the sample
deviation rate of 10% (15/150).
d. Effective, as the achieved upper precision limit of 13% did not exceed the
established tolerable deviation rate of 15%.

27. The confidence level is a complement of which of the following factors to audit
sampling?
a. Tolerable deviation rate
b. Expected deviation rate
c. Allowance for beta sampling risk
d. Allowance for alpha sampling risk

28. An auditor is testing additions to property, plant and equipment which constitutes
a small number of large value items. Which of the following will most likely be used
by the auditor in projecting misstatements to the population?
a. Ratio estimation
b. Difference estimation
c. Mean-per-unit estimation
d. None of the above.

29. When the ratio applied to the book value of the population in ratio estimation is
greater than 1.00 or 100%, the book value of the population is
a. Understated
b. Overstated
c. Either understated or overstated depending on the audited value of the
sample.
d. Either understated or overstated depending on the audited value of the
population.

30. Theoretically, as the sample size in test of details increases, the reliability of the
estimation for the audited value or amount of misstatements related to an account
balance _________.
a. Increases
b. Decreases
c. Is not affected.
d. Increases or decreases, depending on whether the account is overstated
or understated.
*End of Handout*

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