ACCM456

MC: AUDIT SAMPLING

Multiple Choice Questions

____ 1. One of the ways to control non-sampling risk is through

a. Proper supervision and instruction of client’s employee.
b. Proper supervision and instruction of the audit team.
c. The use of attributes sampling rather than variable sampling.
d. Control which ensure that the sample drawn is random and representative.

____ 2. One of the causes of non-sampling error is

a. Failure to draw a random sample.
b. Failure to draw a representative sample.
c. The use of inappropriate or ineffective audit procedures.
d. The use of attribute sampling instead of variables sampling.

____ 3. In determining the sample size for test of controls, an auditor should consider the likely rate of deviations, the allowable
risk of assessing control risk too low, and the
a. Tolerable deviation rate.
b. Risk of incorrect acceptance.
c. Nature and cause of deviations.
d. Population size.

____ 4. For which of the following audit tests would an auditor most likely use attribute sampling?
a. Selecting accounts receivable for confirmation of account balances.
b. Examining invoices in support of the valuation of property, plant, and equipment additions.
c. Making an independent estimate of the amount of FIFO inventory.
d. Inspecting employee time cards for proper approval by supervisors

____ 5. Audit sampling is not involved in the following, except

a. Performing a walkthrough test.
b. Performing analytical procedures
c. Selecting the sample without following a structured technique.
d. Testing controls that leave no audit trail.

____ 6. If the auditor is concerned that a population may contain exceptions, the determination of sample size sufficient to
include at least one such exception is a characteristic of
a. Discovery sampling c. Variables sampling
b. Random sampling d. Peso-unit sampling

____ 7. When using sampling for tests of controls, which of the following audit consequences may follow? 
a. If sample results indicate that the control is operating effectively, but in fact it is not, control risk will
be assessed too low.
b. If sample results indicate that the control is operating effectively, but in fact it is not, control risk will
be assessed too high.
c. If sample results indicate that the control is not operating effectively, but in fact it is operating
effectively, the audit is likely to be faulty because of reduced substantive tests.
d. If sample results indicate that the control is not operating effectively, but in fact it is operating
effectively, control risk will be assessed too low.

____ 8. Which of the following statements relating to stratification is incorrect?

a. When performing tests of details of transactions and account balances, the population is often
stratified by monetary value.
b. The results of audit procedures applied to a sample of items within a stratum can be projected to
the entire population.
 c. When verifying the valuation assertion for accounts receivable, account balances may be stratified
by age.
d. Stratification reduces the variability of items within each stratum.

____ 9. Known error is

a. The auditor's estimate of total population misstatement.
b. The number of control errors found in the sample.
c. The projected number of control errors for the population.
d. The misstatements located in the sampling units tested.

____ 10. The tolerable rate of deviations for a test of control 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 date of errors in related accounting records
d. Unrelated to the expected rate of errors in the related accounting records

____ 11. The likelihood of assessing control risk too high is the risk that sample selected to test controls
a. Does not support the auditor’s planned assessed level of control risk when the true operating
effectiveness of the control structure justifies such an assessment.
b. Contains misstatements that could be material to the financial statements when aggregated with
misstatements in other account balances or transactions.
c. Contains proportionate fewer monetary errors or deviations from prescribed controls than exists in
the balance or class as a whole.
d. Does not support the tolerable error for some or all of management’s assertions.

____ 12. Which of the following combinations is proper?

a. Risk of underreliance and risk of incorrect rejection are both beta risks and affect audit efficiency.
b. Risk of overreliance and risk of incorrect acceptance are both alpha risks and affect audit
effectiveness.
c. Risk of underreliance and risk of incorrect acceptance are both alpha risks and affect audit
effectiveness
d. Risk of overreliance and risk of incorrect acceptance are both beta risk and affect audit effectiveness

____ 13. 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: 
a. Attributes and variable. c. Constants and attributes.
b. Variables and attributes. d. Constants and variables.

____ 14. The primary reason for an auditor to use statistical sampling is to
a. Obtain a smaller sample than would be required by non-statistical sampling techniques.
b. Obtain a sample more representative of the population than would be obtained by non-statistical
sampling techniques.
c. Allow the auditor to quantify, and therefore control,the risk of making an incorrect decision based on
sample evidence.
d. Meet requirements of Statements on Auditing Standards.

____ 15. Which of the following best illustrates the concept of sampling risk?
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 errors in the documents examined for the chosen sample.
 d. The documents related to the chosen sample may not be available for inspection.

____ 16. When performing a test of details during an audit, an auditor determined that the sample results supported the
conclusion that the recorded account balance was materially misstated. It was, in fact, not materially misstated. This
situation illustrates the risks of
a. Assessing control risk too high. c. Incorrect rejection
b. Assessing control risk too low d. Incorrect acceptance

____ 17. The objective of tolerable rate in sampling for tests of controls of internal control is
a. Determine the probability for the auditor’s conclusion based upon reliance factors.
b. Determine that financial statements taken as a whole are not materially in error.
c. Estimate the reliability of substantive tests.
d. Eliminate the range of procedural deviations in the population.

____ 18. Audit sampling for substantive tests is appropriate when

a. Analytical procedures are used.
b. The auditor wants to eliminate sampling risks.
c. A population contains small number of large value items.
d. Test of details are performed.

____ 19. For which of the following audit tests would an auditor most likely use attribute sampling?
a. Selecting accounts receivable for confirmation of account balances.
b. Examining invoices in support of the valuation of property, plant, and equipment additions.
c. Making an independent estimate of the amount of FIFO inventory.
d. Inspecting employee time cards for proper approval by supervisors.

____ 20. Which of the following statements concerning the principal methods of selecting samples is incorrect?
a. The advantage of random number selection technique is that it gives each item in the population an
equal opportunity to be selected.
b. The disadvantage of systematic selection technique is the destruction of sample randomness due to
the creation of a particular pattern in the population from the sampling interval.
c. Haphazard selection is useful for non-statistical sampling but is not used for statistical sampling
because the auditor cannot measure the probability of an item being selected when using this
method.
d. Discovery sampling is more appropriate when more deviations are expected in the population

____ 21. While performing a test of details during an audit, an auditor determined that the sample results supported the conclusion
that the recorded account balance was materially misstated. It was, in fact, not materially misstated. This situation
illustrates the risk of
a. Assessing control risk too high.
b. Assessing contriol risk too low.
c. Incorrect rejection.
d. Incorrect acceptance.

____ 22. At times, a sample may indicate that the auditor's assessed level of control risk for a control is reasonable when, in fact,
the true compliance rate does not justify the assessed level. This situation is the risk of
a. Assessing control risk too low.
b. Assessing control risk too high.
c. Incorrect acceptance.
d. Incorrect rejection.
____ 23. Which of the following statements is correct about the sample size in statistical sampling when testing internal controls? 
a. The auditor should consider the tolerable rate of deviation from the controls being tested in
determining sample size.
b. As the likely rate of deviation decreases, the auditor should increase the planned sample size.
c. The allowable risk of assessing control risk too low has no effect on the planned sample size.
d. Of all the factors to be considered, the population size has the greatest effect on the sample size.

____ 24. Which of the following best illustrates the concept of sampling risk?
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 errors in the documents examined for the chosen sample.
d. The documents related to the chosen sample may not be available for inspection.

____ 25. To determine the number of items to be selected in a sample for a particular substantive test of details, the auditor
should consider all of the following except
a. Tolerable error.
b. Expected error.
c. Allowable risk of incorrect acceptance
d. Characteristics of the population.

____ 26. An attribute sampling plan may be used to test the effectiveness of controls. The auditor’s evaluation to the sampling
results ordinarily leads to a conclusion concerning
a. The relation of the population deviation rate to the tolerable rate.
b. Monetary precision exceeding a certain predetermined amount.
c. The population value not being misstated by more than a predetermined amount.
d. Population characteristics occurring at least once in the population.

____ 27. In assessing sampling risk, the risk of incorrect rejections and the risk of assessing control risk too high relate to the
a. Efficiency of the audit.
b. Effectiveness of the audit.
c. Selection of the sample
d. Audit quality controls

____ 28. Which of the following statements is correct concerning probability proportional to size (PPS) sampling, also known as
dollar unit sampling?
a. The sampling distribution should approximate the normal distribution.
b. Overstated units have a lower probability of sample selection than units that are understated.
c. The auditor controls the risk of incorrect acceptance by specifying that risk level for the sampling
plan.
d. The sampling interval is calculated by dividing the number of physical units in the population by the
sample size.

____ 29. In applying variables sampling, an auditor attempts to

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

____ 30. Which of the following sampling techniques is least desirable by PSA?
a. Haphazard sampling c. Stratified sampling
b. Block sampling d. Sequential sampling
____ 31. An auditor would choose to utilize a nonstatistical sampling, rather than a statistical, plan for which of the following
reasons?
a. The cost to randomly select sampling units exceeds the expected benefits.
b. There is a need to quantify sampling risk.
c. No errors are expected in the sample.
d. The auditor wishes to reduce nonsampling risk.

____ 32. 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 deviation rate
c. Acceptable sampling risk
d. Sample deviation rate

____ 33. 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 error.
d. Predict a monetary population value within a range of precision.

____ 34. Which of the following is true about sampling and non-sampling risks?
a. Sampling risk can be reduced by increasing sample size.
b. Sampling risk cannot be eliminated.
c. Non-sampling risk can be eliminated by proper engagement planning, supervision, and review.
d. Non-sampling risk arises from the possibility that the auditor’s conclusion, based on a sample may
be different from the conclusion reached if the entire population were subjected to the same audit
procedure.

____ 35. An underlying feature of random-based selection of items is that each

a. Stratum of the accounting population be given equal representation in the sample.
b. Item in the accounting population be randomly ordered.
c. Item in the accounting population should have an equal opportunity to be selected.
d. Item must be systematically selected using replacement.

____ 36. When shall an attribute sampling be used?

a. When the auditor aims to determine the samples for confirmation of accounts receivable.
b. When the auditor aims to determine the samples for testing effectiveness of billing procedures of
the company.
c. When the auditor aims to determine the samples for the performance of reasonableness test.
d. When the auditor aims to determine the samples for inventory count

____ 37. The following situations will likely lead the auditor to use 100% testing, except
a. When the population constitutes a small number of large value items.
b. When both inherent and control risks are high and other means do not provide sufficient appropriate
audit evidence
c. When the repetitive nature of a calculation or other process performed by a computer information
system makes a 100% examination cost effective.
d. When testing controls that leave audit trail.

____ 38. The process which requires the calculation of an interval and then selects the items based on the size of the interval is
 a. Statistical sampling c. Systematic selection
b. Random selection d. Computerized selection

____ 39. An auditor is evaluating the results of a variables sampling plan. Which of the following is the least relevant to the
auditor's evaluation?
a. Management's explanations for why errors in the sample occurred.
b. Projecting the sample error to the population.
c. Considering the effects of sampling risk.
d. Qualitative information that lends insight into the errors found.

____ 40. In deciding upon the acceptable risk of incorrect acceptance for an account, an auditor considers each of the following
except
a. Audit risk.
b. The risk that internal controls fail to detect material misstatements that have occurred.
c. Tolerable error.
d. The risk that analytical procedures and other tests fail to detect material errors that occur and that
are not detected by internal control.

____ 41. As a result of sampling procedures applied as tests of controls, an auditor incorrectly assesses control risk lower than
appropriate. Which of the following is the most likely explanation for this situation?
a. The deviation rate in the auditor’s sample exceeds the tolerable rate, but the deviation rate in the
population is less than the tolerable rate.
b. The deviation rate in the auditor’s sample is less than the tolerable rate, but the deviation rate in
the population exceeds the tolerable rate.
c. The deviate rates of both the auditor’s sample and the population are less than the tolerable rate.
d. The deviation rates of both the auditor’s sample and the population exceed the tolerable rate

____ 42. An auditor examining inventory may appropriately apply sampling for attributes in order to estimate the
a. Average price of inventory items.
b. Percentage of slow-moving inventory items.
c. Dollar value of inventory.
d. Physical quantity of inventory items.

____ 43. What is the primary objective of using stratification as a sampling method in auditing?
a. To increase the confidence level at which decision will be reached from the results of sample
selected.
b. To determine the occurrence rate for a given characteristic in the population being studied.
c. To decrease the effect of variance in the total population.
d. To determine the precision range of the sample selected.

____ 44. 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.

____ 45. An advantage of using statistical over non-statistical sampling methods in test of controls is that statistical methods
a. Can more easily convert the sample into a dual-purpose test useful for substantive testing.
b. Eliminate the need to use judgment in determining appropriate sample sizes.
c. Afford greater assurance than a non-statistical sample of equal size.
d. Provide an objective basis for quantitatively evaluating sample risk.
____ 46. The final step in the evaluation of audit results in the decision to
a. Accept the population is 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.

____ 47. Which of the following has the least effect on sample size in a variables sample?
a. Acceptable risk of incorrect acceptance.
b. Tolerable misstatement.
c. Size of the population.
d. Estimated standard deviation of the population.

____ 48. An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps an auditor to
a. Minimize the failure to detect errors and frauds.
b. Eliminate nonsampling risk.
c. Reduce the level of audit risk and materiality to a relatively low amount.
d. Measure the sufficiency of the evidential matter obtained.

____ 49. The risk of incorrect acceptance and the likelihood of assessing control risk too low relate to the
a. Allowable risk of tolerable misstatement.
b. Preliminary estimates of materiality levels.
c. Efficiency of the audit.
d. Effectiveness of the audit.

____ 50. In assessing sampling risk, the risk of incorrect rejection and the risk of assessing control risk too high relate to the
a. Effectiveness of the audit.
b. Efficiency of the audit.
c. Audit quality control.
d. Selection of the sample.
MC AUDIT SAMPLING
Answer Section

MULTIPLE CHOICE

1. ANS: B PTS: 1 REF: SALOSAGCOL C9 MC12

2. ANS: C PTS: 1 REF: SALOSAGCOL C9 MC11
3. ANS: A PTS: 1 REF: WILEY M7 MC23
4. ANS: D PTS: 1 REF: DLSL AT08 MC27
5. ANS: C PTS: 1 REF: CPAR AT07 MC3
6. ANS: A PTS: 1 REF: SALOSAGCOL C9 MC43
7. ANS: A PTS: 1 DIF: Hard REF: WHITTINGTON C9 MC36
8. ANS: B PTS: 1 REF: DLSL AT08 MC37
9. ANS: D PTS: 1 REF: RICCHIUTE C9 MC22
10. ANS: B PTS: 1 REF: DLSL AT08 MC21
11. ANS: A PTS: 1 REF: WILEY M7 MC3
12. ANS: D PTS: 1 REF: DLSL AT08 MC15
13. ANS: B PTS: 1 DIF: Easy REF: WHITTINGTON C9 MC73
14. ANS: C PTS: 1 REF: KONRATH C10 MC7
15. ANS: A PTS: 1 REF: CPAR AT07 MC10
16. ANS: C PTS: 1 REF: CTDI AS MC9
17. ANS: D PTS: 1 REF: WILEY M7 MC28
18. ANS: D PTS: 1 REF: SALOSAGCOL C9 MC3
19. ANS: D PTS: 1 REF: ROQUE C8 MC18
20. ANS: D PTS: 1 REF: DLSL AT08 MC8
21. ANS: C PTS: 1 REF: WILEY M7 MC9
22. ANS: A PTS: 1 REF: RICCHIUTE C9 MC29
23. ANS: A PTS: 1 DIF: Medium REF: WHITTINGTON C9 MC59
24. ANS: A PTS: 1 REF: KONRATH C10 MC17
25. ANS: D PTS: 1 REF: KONRATH C10 MC11
26. ANS: A PTS: 1 REF: DLSL AT08 MC29
27. ANS: A PTS: 1 REF: WILEY M7 MC6
28. ANS: C PTS: 1 REF: WILEY M7 MC46
29. ANS: A PTS: 1 REF: ROQUE C8 MC52
30. ANS: B PTS: 1 REF: DLSL AT08 MC13
31. ANS: A PTS: 1 REF: RICCHIUTE C9 MC1
32. ANS: A PTS: 1 REF: SALOSAGCOL C9 MC21
33. ANS: D PTS: 1 REF: KONRATH C10 MC1
34. ANS: A PTS: 1 REF: CPAR AT07 MC6
35. ANS: C PTS: 1 REF: WILEY M7 MC14
36. ANS: B PTS: 1 REF: DLSL AT08 MC7
37. ANS: D PTS: 1 REF: CPAR AT07 MC4
38. ANS: C PTS: 1 REF: CPAR AT07 MC13
39. ANS: A PTS: 1 REF: RICCHIUTE C9 MC31
40. ANS: C PTS: 1 REF: RICCHIUTE C9 MC30
41. ANS: B PTS: 1 REF: DLSL AT08 MC30
42. ANS: B PTS: 1 REF: RICCHIUTE C9 MC28
43. ANS: C PTS: 1 REF: WILEY M7 MC19
44. ANS: B PTS: 1 REF: WILEY M7 MC17
45. ANS: D PTS: 1 REF: WILEY M7 MC1
46. ANS: A PTS: 1 REF: SALOSAGCOL C9 MC50
47. ANS: C PTS: 1 REF: RICCHIUTE C9 MC17
48. ANS: D PTS: 1 REF: CPAR AT07 MC8
49. ANS: D PTS: 1 REF: WILEY M7 MC4
50. ANS: B PTS: 1 REF: ROQUE C8 MC14 q1