UNIVERSITY OF THE IMMACULATE CONCEPTION

COLLEGE OF ACCOUNTING AND BUSINESS EDUCATION

AUD001-Auditing and Assurance Principles

AT2. Quiz - Audit Sampling

I. Multiple Choice. Encircle the letter of your choice. No erasures allowed.

1. The entire set of data about which the auditor wishes to draw conclusions is called
a. Population. c. Sampling frame.
b. Sample. d. Sampling unit.

2. Which of the following constitutes audit sampling?

a. Selecting and examining specific items to determine whether or not a particular procedure is being
performed.
b. Examining items to obtain information about matters such as the client’s business, the nature of
transactions, accounting and internal control systems.
c. Examining items whose values exceed a certain amount so as to verify a large proportion of the total amount
of an account balance or class of transactions.
d. Applying audit procedures to less than 100% of items within an account balance or class of transactions
such that all sampling units have a chance of selection.

3. 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.

4. 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.

5. 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 is called
a. Sampling error. c. Anomalous error.
b. Non-sampling error. d. Projected error.

6. 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.

7. Which statement is incorrect about sampling risk?

a. 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.
b. Risk of assessing control risk too low and risk of incorrect acceptance affects audit effectiveness as it would
usually lead to additional work to establish that initial conclusions were incorrect.
c. The mathematical complements of sampling risks are termed confidence levels.
d. Risk of assessing control risk too high is the risk that the auditor will conclude, in the case of a test of
control, that control risk is higher than it actually is.

8. 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 non-sampling risk.
c. Reduce the level of audit risk and materiality to a relatively low amount.
d. Measure the sufficiency of the evidential matter obtained.

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 UNIVERSITY OF THE IMMACULATE CONCEPTION
COLLEGE OF ACCOUNTING AND BUSINESS EDUCATION
AUD001-Auditing and Assurance Principles
9. Each time an auditor draws a conclusion based on evidence from a sample, an additional risk,
sampling risk, is introduced. An example of sampling risk is

a. Projecting the results of sampling beyond the population tested.

b. Properly applying an improper audit procedure to sample data.
c. Improperly applying a proper audit procedure to sample data.
d. Drawing an erroneous conclusion from sample data.

10. 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.

11. Which of the following statements is not correct?

a. It is acceptable for auditor to use statistical sampling methods.
b. It is acceptable for auditor to use non-statistical sampling methods.
c. The primary benefit of statistical sampling methods is the quantification of sampling risk.
d. An advantage of using statistical sampling is that the cost/benefit ratio is always positive.

12. A sample in which every possible combination of items in the population has an equal chance of
constituting the sample is a
a. Representative sample c. Random sample
b. Statistical sample d. Judgment sample

13. 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

14. When the auditor goes through a population and selects items for the sample without regard to their size,
source, or other distinguishing characteristics, it is called
a. Block selection c. Systematic selection
b. Random selection d. Haphazard selection

15. Which of the following statistical selection techniques is least desirable for use by an auditor?
a. Systematic selection c. Block selection
b. Stratified selection d. Sequential selection

16. Tests of controls provide reasonable assurance that controls are applied as prescribed. A sampling method
that is useful when testing controls is:
a. Nonstatistical sampling c. Discovery sampling
b. Attribute estimation sampling d. Stratified random sampling

17. Statistical sampling may be applied to test controls when a client’s control procedures
a. Depend primarily on segregation of duties.
b. Are carefully reduced to writing and are included in client accounting manuals.
c. Leave an audit trail as evidence of compliance.
d. Enable the detection of fraud.

18. Since auditors are interested in the occurrence of exceptions in population, they refer to the
occurrence as
a. Exception rate c. Deviation rate
b. Population rate d. Confidence level

19. 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 c. Acceptable risk of over-reliance
b. Estimated population deviation rate d. Sample deviation rate

20. Which of the following statements is correct?

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 UNIVERSITY OF THE IMMACULATE CONCEPTION
COLLEGE OF ACCOUNTING AND BUSINESS EDUCATION
AUD001-Auditing and Assurance Principles
a. The expected population deviation rate has little or no effect on sample size.
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 sample size except for very small populations.

21. 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.

22. If the auditor is concerned that a population may contain exceptions, the determination of a sample size
sufficient to include at least one such exception is a characteristic of
a. Discovery sampling c. random sampling
b. Variable sampling d. PPS

23. At times a sample may indicate that the auditor’s assessed level of control risk for a given control is
reasonable when, in fact, the true compliance rate does not justify the assessed level. This situation illustrates
the risk of
a. Assessing control risk too low c. Incorrect precision
b. Assessing control risk too high d. Incorrect rejection

24. In attribute estimation, which of the following must be known in order to appraise the results of the auditor’s
sample?
a. Estimated peso value of the population
b. Standard deviation of the values in the population
c. Actual occurrence rate of the attribute in the population
d. Sample size

25. Assuming the tolerable deviation rate is 5 percent, the expected population rate is 3 percent, and the
allowance for sampling risk is 2 percent, what should an auditor conclude if tests of 100 randomly selected
documents reveals 4 deviations?
a. Accept the sample results as support for assessing control risk below the maximum because the tolerable
rate less the allowance for sampling risk equals the expected population deviation rate.
b. Assess control risk at the maximum because the sample deviation rate plus the allowance for sampling risk
exceeds the tolerable rate.
c. Assess control risk at the maximum because the tolerable rate plus the allowance for sampling risk exceeds
the expected population deviation rate.
d. Accept the sample results as support for assessing control risk below the maximum because the sample
deviation rate plus the allowance for sampling risk exceeds the tolerable rate.

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

27. The likelihood of assessing control risk too low is the risk that the sample selected to test controls
a. Does not support the tolerable misstatement for some or all of management’s assertions.
b. Does support the auditor’s planned assessed level of control risk when the true operating effectiveness of
the control does not justify such an assessment.
c. Contains misstatements that could be material to the financial statements when aggregated with
misstatements in other account balances.
d. Contains proportionately more deviations from prescribed internal control policies or procedures than exist in
the population.

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 UNIVERSITY OF THE IMMACULATE CONCEPTION
COLLEGE OF ACCOUNTING AND BUSINESS EDUCATION
AUD001-Auditing and Assurance Principles
28. The likelihood of assessing control risk too high is the risk that the 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 justifies such an assessment.

b. Contains misstatements that could be material to the financial statements when aggregated with
misstatements in other account balances or transaction classes.
c. Contains proportionately fewer monetary errors or deviations from prescribed internal control policies or
procedures than exist in the balance or class as a whole.
d. Does not support the tolerable misstatement for some or all of management’s assertions.

29. The tolerable rate of deviations for a test of controls is generally

a. Lower than the expected rate of errors in the related accounting population.
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.

30. If a selected random number matches the number of a voided voucher, the voucher ordinarily should be
replaced by another voucher in the sample if the voucher
a. Constitutes a deviation c. Cannot be located
b. Has been properly voided d. Represents an immaterial peso amount

31. “Whenever a sample is taken, there is a risk that the quantitative conclusions about the population will be
incorrect.”
a. This is always true.
b. This is always true unless 100 percent of the population is tested.
c. This is true for statistical sampling, but not for non-statistical sampling.
d. This is true for non-statistical sampling but not for statistical sampling.

32. Which of the following sampling methods is used to estimate a numerical measurement of a population,
such as a dollar value?
a. Attribute sampling. c. Variables sampling.
b. Stop-or-go sampling. d. Random-number sampling.

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 deviation.
d. Predict a monetary population value within a range of precision.

34. Several risks are inherent in the evaluation of audit evidence that has been obtained through the use of
statistical sampling. An example of a beta or Type II error related to sampling risk is the failure to
a. Properly define the population to be sampled.
b. Draw a random sample from the population.
c. Reject the statistical hypothesis that a book value is not materially misstated when the true book value is
materially misstated.
d. Accept the statistical hypothesis that the book value is not materially misstated when the true book value is
not materially misstated.

35. As lower acceptable levels of both audit risk and materiality are established, the auditor should plan more
work on individual accounts to
a. Find smaller misstatements. c. Increase the tolerable misstatement in the accounts.
b. Find larger misstatements. d. Decrease the risk of assessing control risk too low.

36. In performing substantive tests, the auditor is concerned with two risks or errors of sampling:
1. The risk of incorrect rejection (an alpha or Type I error)
2. The risk of incorrect acceptance (a beta or Type II error)
Which of the following is true about alpha and beta errors?
a. The alpha error is of greater concern to the auditor than the beta error.
b. The beta error is of greater concern to the auditor than the alpha error.
c. The beta error and the alpha error are of equal importance to the auditor.
d. Neither the alpha error nor the beta error need be considered by the auditor.

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 UNIVERSITY OF THE IMMACULATE CONCEPTION
COLLEGE OF ACCOUNTING AND BUSINESS EDUCATION
AUD001-Auditing and Assurance Principles
37. 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
a. Assessing control risk too low. c. Incorrect rejection.
b. Assessing control risk too high. d. Incorrect acceptance.

38. Conducting a substantive test of an account balance, an auditor hypothesis that no material misstatement
exists. The risk that sample results will support the hypothesis when a material misstatement actually does
exist is the risk of
a. Incorrect rejection. c. Incorrect acceptance.
b. Alpha error. d. Type I error.

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

40. When would difference estimation or ratio estimation sampling methods be inappropriate?
a. If differences between the book values and audit values of a population are rare.
b. If the average difference between the audit value and book value of a population is small.
c. If differences between the book value and audit value of a population are numerous.
d. If the average difference between the audit value and book value of a population is large.

II. Essay. 5 pts each.

1. Explain the difference between sampling risk and non-sampling risk.

2. Explain the differences between non-statistical and statistical sampling.
3. Explain the meaning of stratification and why auditors stratify audit populations.
4. If the evaluation of sample results suggests that there is a material misstatement in the population, what
courses of action are available to the auditor.
5. Provide a brief explanation of attribute sampling and why it is used for tests of controls.

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