Audit Sampling

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Of the following statements, which one best differentiates statistical sampling from
nonstatistical sampling? *
1 point

Statistical sampling is a mathematical approach to inference, whereas nonstatistical sampling is a more

subjective approach.
Nonstatistical sampling has greater applicability to large populations than does statistical sampling.
Nonstatistical sampling is more subjective, but produces greater consistency in the application of audit
judgment.
Nonstatistical sampling has greater applicability to populations that lend themselves to random selection.

Monetary unit sampling is also referred to as all of the following except: *

1 point

Attribute sampling.
Dollar unit sampling.
Cumulative monetary amount sampling.
Sampling with probability proportional to size.

In examining cash disbursements, an auditor plans to choose a sample using

systematic selection with a random start. The primary advantage of such systematic
selection is that population items *
1 point

Which include errors will not be overlooked when the auditor exercises compatible reciprocal options.
May occur in a systematic pattern, thus making the sample more representative.
May occur more than once in a sample.
Do not have to be pre-numbered in order for the auditor to use the technique.

Which of the following statements concerning alpha and beta risk is true? *
1 point

As alpha risk increases, beta risk decreases.

As inherent risk and/or control risk increase, beta risk should also increase.
As inherent risk and/or control risk increase, beta risk should decrease.
As a "rule of thumb," the auditor generally sets beta risk equal to or less than 10%, inasmuch as it is the
basis for the audit opinion.
If acceptable audit risk is increased, ARIA (Acceptable risk of incorrect acceptance)
should be: *
1 point

Increased.
Reduced.
Unaffected.
Modified.

The final step in the evaluation of the audit results is the decision to: *
1 point

Accept the population as fairly stated or to require further action.

Determine sampling error and calculate the estimated total population error.
Project the point estimate.
Determine the error in each sample.

Which of the following statements concerning sample size is true? *

1 point

An increase in the tolerable occurrence rate, other factors remaining unchanged, increases sample size.
The higher the expected occurrence rate, other factors remaining unchanged, the larger will be the sample
size.
The more critical the attribute being tested, the higher will be the tolerable occurrence rate set by the
auditor, and the larger will be the sample size.
The lower the acceptable risk of underassessment of control risk, the smaller will be the sample size.

Which of the following does not have to be considered in determining the initial sample
size of a test of details? *
1 point

tolerable misstatement
acceptable risk of incorrect rejection
estimate of misstatements in the population
acceptable audit risk

Sampling risk refers to the possibility that: *

1 point

The auditor may use a less than optimal statistical method for the circumstances, e.g. difference estimation
instead of ratio estimation.
The auditor may fail to recognize an error that is included in the sample.
Even though a sample is properly chosen, it may not be representative of the population.
The confidence level and/or precision established by the auditor are not appropriate.

While performing a substantive test of details during an audit, the 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: *
1 point

Incorrect rejection.
Incorrect acceptance.
Assessing control risk too low.
Assessing control risk too high.

The relationship between required sample size and the acceptable risk of incorrect
acceptance is: *
1 point

Inverse.
Direct.
Proportional.
Indeterminate.

The method used to measure the estimated total error amount in a population when
there is both a recorded value and an audited value for each item in the sample is: *
1 point

Difference estimation.
Mean-per-unit estimation.
Ratio estimation.
Monetary-unit sampling.

Which of the following best illustrates the concept of sampling risk? *

1 point

A randomly chosen sample may not be representative of the population as a whole on the characteristic of
interest.
An auditor may select audit procedures that are not appropriate to achieve the specific objective.
An auditor may fail to recognize errors in the documents examined for the chosen sample.
The documents related to the chosen sample may not be available for inspection.

Both sampling and nonsampling risks are associated with: Test of Controls;
Substantive Tests of Transactions. *
1 point

Yes Yes
No No
Yes No
No Yes

Which of the following factors is generally not considered in determining the sample
size for a test of controls? *
1 point

Population size.
Tolerable rate.
Risk of underassessment.
Expected population occurrence rate.

Precision is defined as the range (plus or minus) within which the true answer most
likely falls. Reliability, also referred to as the confidence level, is the likelihood that the
sample range contains the true value. Of the following statements concerning
precision and reliability, which one is not true? *
1 point

Precision is set by the auditor and is a function of materiality and risk.

The narrower the range of precision, the smaller the sample size.
An increase in control risk, other parameters remaining unchanged, causes a narrowing of the precision
range.
Overall audit risk is the complement of reliability.

In conducting a substantive test of an account balance, an auditor hypothesizes that

no material error exists. The risk that sample results will support the hypothesis when
a material error actually does exist is the risk of *
1 point

Incorrect rejection.
Alpha error.
Incorrect acceptance.
Type I error.

As the amount of misstatements expected in the population approaches tolerable

misstatement, the planned sample size will: *
1 point

Decrease.
Increase.
Vary based on characteristics of the population.
Be unaffected.

It means 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 *
1 point

Tolerable error
Anomalous error
Isolated error
Unexpected error
If an auditor concludes that internal controls are likely to be effective, the preliminary
assessment of control risk can be reduced, leading to a(n) ______ the acceptable risk
of incorrect acceptance. *
1 point

Reduction in
Increase in
Elimination of
Increase or decrease

Sampling used for tests of details provides results in terms of: *

1 point

Exception rates.
Percentages.
Pesos
Expectation rates.

The tolerable occurrence rate for a control test is generally *

1 point

Lower than the expected occurrence rate in the related accounting records.
Higher than the expected occurrence rate in the related accounting records.
Identical to the expected occurrence rate in the related accounting records.
Unrelated to the expected occurrence rate in the related accounting records.

Which of the following is an element of sampling risk? *

1 point

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

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

Audit sampling is a required audit procedure. *

1 point

True
False

What is the purpose of applying stratified sampling to a population? I. To avoid items

that may contain misstatements; II. To emphasize certain items and deemphasize
others *
1 point

Yes Yes
No No
Yes No
No Yes

What is the primary objective of using stratified sampling in auditing? *

1 point

To increase the confidence level at which a decision will be reached from the results of the sample
selected.
To determine the occurrence rate for a given characteristic in the population being studied.
To decrease the effect of variance in the total population.
To determine the precision range of the sample selected.

An auditor selects a statistical sample from a large inventory of replacement parts.

Which of the following audit objectives would be most appropriate if the sampling
method used is probability proportional to size (PPS)? *
1 point

The auditor plans to estimate the total dollar value of the inventory when a recorded book value does not
exist.
The auditor plans to make a statement concerning the total dollar amount of error in the population from
the recorded book value.
The auditor wishes to accept or reject the hypothesis that the proportion of defective parts in the population
is less than 5%.
The auditor wishes to estimate the proportion of defective parts in the population.

In monetary-unit sampling, the relationship between tolerable misstatement size and

required sample size is: *
1 point

Direct.
Inverse.
Varied.
Indeterminable.

When errors are found, a common assumption in practice is to assume: *

1 point

A 100% assumption for all errors.

That the population errors are larger than the sample errors.
That the population errors are smaller than the sample errors.
That the actual sample errors are representative of the population errors.

Which of the following is not a likely item on which to apply stratification techniques?  *
1 point

aging of accounts receivable

dollar value of accounts receivable
customer names of account receivables
number of sales per customer in a period
Use of the ratio estimation sampling technique to estimated dollar amounts is
inappropriate when: *
1 point

The total book value is known and corresponds to the sum of all the individual book values.
A book value for each sample item is unknown.
There are some observed differences between audited values and book values.
The audited values are nearly proportional to the book values.

Tolerable misstatement is used to: I. Determine sample size. II. Select the sample. III.
Evaluate results. *
1 point

Yes Yes No
No Yes No
No No Yes
Yes No Yes

The most commonly used method of statistical sampling for tests of details of
balances is: *
1 point

Attributes sampling.
Systematic sampling.
Discovery sampling.
Monetary-unit sampling.

Which of the following is not a term relevant to sampling for tests of details? *
1 point

Acceptable risk of incorrect rejection

Analysis of misstatements
Estimate misstatements in the population
Define the exception conditions

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 *
1 point

Cluster sample.
Discovery sample.
Systematic sample. .
Stratified sample

When auditors sample for tests of details of balances, the objective is to determine
whether the: *
1 point

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.

Auditors who prefer statistical to non-statistical sampling believe that the principal
advantage of statistical sampling flows from its unique ability to *
1 point

Define the precision required to provide adequate satisfaction.

Provide a mathematical measurement of risk.
Establish conclusive audit evidence with decreased audit effort.
Promote a more legally defensible procedural approach.

Which of the following is the auditor least likely to consider when estimating
misstatements in the population? *
1 point

Prior experience with the client.

Results of current year tests of controls.
Results of analytical procedures already performed.
Acceptable audit risk.

The acceptable risk of incorrect acceptance is most related to: *

1 point

Audit efficiency.
Audit results.
Audit effectiveness.
Audit estimation.

In a probability proportional to size (PPS) sample, all population physical audit units
with an amount equal to or greater than the amount of the interval will automatically be
included in the sample if the auditor uses: *
1 point

Random selection.
Systematic selection.
Block selection.
Stratified selection.

If an auditor desires a greater level of assurance in auditing a balance, the acceptable

risk of incorrect acceptance: *
1 point

Is reduced.
Is increased.
Is not changed.
May be reduced or increased depending upon other circumstances.

Which balance-related audit objective cannot be assessed using monetary unit

sampling? *
1 point

Accuracy.
Completeness.
Existence.
All of the above can be assessed using monetary unit sampling.

The variables sampling method which generally results in smaller sample sizes than
any other method is: *
1 point

Ratio estimation.
Difference estimation.
Monetary-unit sampling.
Mean-per-unit estimation.

When using systematic selection procedures with monetary-unit sampling of accounts

receivable, the interval is determined by: *
1 point

Consulting a random number table.

Dividing the population size by the desired sample size.
Dividing the sample size by the account with the largest dollar value.
Dividing the population size by the account receivable with the largest dollar value.

The risk the auditor is willing to take of accepting a balance as correct when the true
misstatement in the balance under audit is greater than the tolerable misstatement
is: *
1 point

The upper bound.

The tolerable risk.
The acceptable risk of incorrect acceptance.
The lower bound.

While performing a substantive test of details during an audit, the auditor determined
that the sample results supported the conclusion that the recorded account balance
was materially misstated. Which of the following is not likely to be an acceptable
reaction to this discovery? *
1 point
Perform expanded audit tests in the relevant areas
Increase detection risk in the relevant areas
Increase the sample size
Take no action until tests of other audit areas are completed

An advantage of statistical over non-statistical sampling is that statistical sampling: *

1 point

Enables auditors to objectively measure the reliability of their sample results.

Permits use of a smaller sample size than would be necessary with non-statistical sampling.
Is compatible with a wider variety of sample selection methods than is non-statistical sampling.
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.

Which of the following is not a type of statistical method that provides results in dollar
terms? *
1 point

Variables sampling.
Attributes sampling.
Monetary-unit sampling.
Sampling with probability proportional to size.

An auditor performs a test to determine whether all merchandise for which the client
was billed was received. The population for this test consists of all *
1 point

Merchandise received.
Vendors' invoices.
Canceled checks.
Receiving reports.

The appropriate assumption to make regarding the overall percent of error in those
population items containing an error is: *
1 point

Determined using random number tables.

Set after a quantitative analysis of client’s internal control system.
Based on the auditor’s personal judgment in the circumstances.
Based on statistical analysis using confidence limits.

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