Question 1

An auditor plans to examine a sample of 20 checks for countersignatures as prescribed by the entity's internal control procedures.One of the checks in the chosen sample of 20 cannot be found.The auditor should consider the reasons for this limitation and

Accepted Answer

A)   evaluate the results as if the sample size had been 19.
B)   treat the missing check as a deviation for the purpose of evaluating the sample.
C)   treat the missing check in the same manner as the majority of the other 19 checks (i.e., countersigned or not) .
D)   choose another check to replace the missing check in the sample.E) B) and D)
F) B) and C)

Question 2

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

Accepted Answer

A)   A randomly chosen sample may not be representative of the population as a whole (regarding the characteristic being tested) .
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.E) None of the above
F) A) and B)

Question 3

Confidence level and sampling risk are related to sample size.

Accepted Answer

A) True 
 B)False

Question 4

The tolerable deviation rate for a test of controls is generally

Accepted Answer

A)   lower than the expected rate of deviations in the related accounting records.
B)   higher than the expected rate of deviations in the related accounting records.
C)   identical to the expected rate of deviations in the related accounting records.
D)   unrelated to the expected rate of deviations in the related accounting records.E) All of the above
F) B) and D)

Question 5

An advantage of using statistical over nonstatistical sampling methods in tests of controls is that the statistical methods

Accepted Answer

A)   afford greater assurance than a nonstatistical sample of equal size.
B)   provide an objective basis for quantitatively evaluating sample risks.
C)   can more easily convert the sample into a dual-purpose test useful for substantive testing.
D)   eliminate the need to use judgment in determining appropriate sample sizes.E) All of the above
F) A) and B)

Question 6

If the size of the sample to be used in a particular test of controls has not been determined by utilizing statistical concepts,but the sample has been chosen in accordance with random selection procedures

Accepted Answer

A)   no inferences can be drawn from the sample.
B)   the auditor has committed a nonsampling error.
C)   depending on the size of the sample chosen, the auditor may actually achieve desired precision.
D)   the auditor will have to evaluate the results by reference to the principles of discovery sampling.E) C) and D)
F) None of the above

Question 7

In determining the sample size for a test of controls,an auditor should consider the expected deviation rate,desired confidence level,and the

Accepted Answer

A)   tolerable deviation rate.
B)   risk of incorrect acceptance.
C)   nature and cause of deviations.
D)   population size.E) A) and D)
F) A) and C)

Question 8

For an attributes sampling plan,the tolerable deviation rate is 4.5%,the computed upper deviation rate is 7%,the sample deviation rate is 3%,and the desired confidence level is 95%.What is the allowance for sampling risk included in the computed upper deviation rate?

Accepted Answer

A)   1.5%.
B)   3%.
C)   4%.
D)   5%.The computed upper deviation rate includes the sample deviation rate and the allowance for sampling risk. Therefore, if we subtract the sample deviation rate from the computed upper deviation rate, the difference is the achieved allowance for sampling risk, or 4% (7% - 3%) .E) A) and B)
F) B) and C)

Question 9

When testing automated IT controls,the auditor is most likely to do all of the following except:

Accepted Answer

A)   examine the IT software.
B)   increase sample size because the tolerable deviation rate tends to be higher for automated IT controls.
C)   test one or a few of each type of transaction.
D)   test general controls over system and program changes.E) C) and D)
F) B) and D)

Question 10

As a result of tests of controls,an auditor incorrectly assessed control risk too low and decreased substantive testing.This assessment occurred because the true deviation rate in the population was

Accepted Answer

A)   more than the risk of assessing control risk too low based on the auditor's sample.
B)   more than the deviation rate in the auditor's sample.
C)   less than the risk of assessing control risk too low based on the auditor's sample.
D)   less than the deviation rate in the auditor's sample.E) A) and D)
F) All of the above

Question 11

Which of the following factors does an auditor generally need to consider in planning a particular audit sample for a test of controls?

Accepted Answer

A)   Number of items in the population.
B)   Total dollar amount of the items to be sampled.
C)   Desired confidence level.
D)   Risk of assessing control risk too high.E) A) and B)
F) B) and D)

Question 12

Harvey Jones,CPA,uses statistical sampling to test control procedures.What is a benefit of using statistical sampling?

Accepted Answer

A)   It provides a means of mathematically measuring the sampling risk that result from examining only a part of the data.
B)   It eliminates the use of judgment required of Jones because the AICPA has established numerical criteria for this type of testing.
C)   It increases Jones' knowledge of the entity's prescribed procedures and their limitations.
D)   It is required by generally accepted auditing standards.E) B) and C)
F) All of the above

Question 13

Before performing sampling procedures in an audit of controls,Sue set the tolerable deviation rate at 4.0%.After the procedures,she computes a computed upper deviation rate of 5.4%.What can Sue conclude about the entity's controls?

Accepted Answer

Sue must conclude that the con...

Question 14

For attributes sampling,of the three factors that enter into sample size determination,which two factors can the auditor adjust to reflect the importance of the control?

Accepted Answer

A)   Tolerable deviation rate and confidence level.
B)   Expected deviation rate and confidence level.
C)   Population size and tolerable deviation rate.
D)   Tolerable deviation rate and expected deviation rate.E) None of the above
F) C) and D)

Question 15

In nonstatistical sampling for tests of controls,increasing the desired confidence level results in a

Accepted Answer

A)   higher tolerable deviation rate.
B)   lower expected deviation rate.
C)   larger sample size.
D)   smaller sample size.E) All of the above
F) A) and D)

Question 16

Your uncle Bob,a CPA,has recently started auditing and he wants your advice on some tests of sales transactions he is conducting.Bob selected a haphazard sample of 15 sales with a total book value of $75,000.In his sample,he found a total of $500 in net overstatement errors.The total sales balance per book is $10,000,000.Overall materiality for the engagement is $300,000.Tolerable misstatement for sales is $70,000.If the sample results indicate that Bob's best estimate of total misstatement in sales is $35,000,can Bob safely conclude that no additional work is needed in this area? Include in your answer a clear discussion of how sample results are compared to tolerable misstatement.

Accepted Answer

No,Bob cannot safely conclude that no ad...

Question 17

The larger the sample,the lower the confidence level and the lower the sampling risk.

Accepted Answer

A) True 
 B)False

Question 18

Your manager,Sally,believes that nonstatistical sampling is the best method to use on the audit of YaYa Corporation.You,however,believe that statistical sampling is by far the better method.In addition,you have a great deal of training in the proper use of sampling techniques.Prepare an argument to convince Sally why statistical sampling should be used.

Accepted Answer

Statistical sampling permits the auditor...

Question 19

Based on a 5% risk of assessing control risk too low,how would an auditor interpret a computed upper deviation rate of 7%?

Accepted Answer

A)   The auditor is willing to accept a deviation rate of 7% before deciding not to rely on the control.
B)   There is a 5% chance that the deviation rate in the population is less than 7%.
C)   There is a 5% chance that the deviation rate in the population exceeds 7%.
D)   There is a 95% chance that the deviation rate in the population equals 7%.E) B) and D)
F) None of the above

Question 20

For a large population of cash disbursement transactions,Smith,CPA is testing controls by using attribute sampling techniques.Anticipating an expected deviation rate of 3 percent,Smith found from a table that the required sample size is 400 with a tolerable deviation rate of 5 percent and a desired confidence level of 95 percent.If Smith anticipated an expected deviation rate of only 2 percent but wanted to maintain the same tolerable deviation rate and confidence level,the sample size would be closest to

Accepted Answer

A)   200.
B)   400.
C)   533.
D)   800.E) A) and D)
F) A) and C)

Exam 8: Audit Sampling: An Overview and Application to Tests of Controls

Harvey Jones,CPA,uses statistical sampling to test control procedures.What is a benefit of using statistical sampling?

Correct Answer
verified

Correct Answer
verified

The tolerable deviation rate for a test of controls is generally

Correct Answer
verified

An advantage of using statistical over nonstatistical sampling methods in tests of controls is that the statistical methods

Correct Answer
verified

The larger the sample,the lower the confidence level and the lower the sampling risk.

Correct Answer
verified

If the size of the sample to be used in a particular test of controls has not been determined by utilizing statistical concepts,but the sample has been chosen in accordance with random selection procedures

Correct Answer
verified

Based on a 5% risk of assessing control risk too low,how would an auditor interpret a computed upper deviation rate of 7%?

Correct Answer
verified

In nonstatistical sampling for tests of controls,increasing the desired confidence level results in a

Correct Answer
verified

For attributes sampling,of the three factors that enter into sample size determination,which two factors can the auditor adjust to reflect the importance of the control?

Correct Answer
verified

For an attributes sampling plan,the tolerable deviation rate is 4.5%,the computed upper deviation rate is 7%,the sample deviation rate is 3%,and the desired confidence level is 95%.What is the allowance for sampling risk included in the computed upper deviation rate?

Correct Answer
verified

Which of the following factors does an auditor generally need to consider in planning a particular audit sample for a test of controls?

Correct Answer
verified

Before performing sampling procedures in an audit of controls,Sue set the tolerable deviation rate at 4.0%.After the procedures,she computes a computed upper deviation rate of 5.4%.What can Sue conclude about the entity's controls?

Correct Answer
verified
Sue must conclude that the con...
View Answer

As a result of tests of controls,an auditor incorrectly assessed control risk too low and decreased substantive testing.This assessment occurred because the true deviation rate in the population was

Correct Answer
verified

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

Correct Answer
verified

When testing automated IT controls,the auditor is most likely to do all of the following except:

Correct Answer
verified

In determining the sample size for a test of controls,an auditor should consider the expected deviation rate,desired confidence level,and the

Correct Answer
verified

Confidence level and sampling risk are related to sample size.

Correct Answer
verified

Correct Answer
verified
No,Bob cannot safely conclude that no ad...
View Answer

An auditor plans to examine a sample of 20 checks for countersignatures as prescribed by the entity's internal control procedures.One of the checks in the chosen sample of 20 cannot be found.The auditor should consider the reasons for this limitation and

Correct Answer
verified

Correct Answer
verified
Statistical sampling permits the auditor...
View Answer

Exam 8: Audit Sampling: An Overview and Application to Tests of Controls

Harvey Jones,CPA,uses statistical sampling to test control procedures.What is a benefit of using statistical sampling?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The tolerable deviation rate for a test of controls is generally

Correct AnswerverifiedShow Answer

An advantage of using statistical over nonstatistical sampling methods in tests of controls is that the statistical methods

Correct AnswerverifiedShow Answer

The larger the sample,the lower the confidence level and the lower the sampling risk.

Correct AnswerverifiedShow Answer

If the size of the sample to be used in a particular test of controls has not been determined by utilizing statistical concepts,but the sample has been chosen in accordance with random selection procedures

Correct AnswerverifiedShow Answer

Based on a 5% risk of assessing control risk too low,how would an auditor interpret a computed upper deviation rate of 7%?

Correct AnswerverifiedShow Answer

In nonstatistical sampling for tests of controls,increasing the desired confidence level results in a

Correct AnswerverifiedShow Answer

For attributes sampling,of the three factors that enter into sample size determination,which two factors can the auditor adjust to reflect the importance of the control?

Correct AnswerverifiedShow Answer

For an attributes sampling plan,the tolerable deviation rate is 4.5%,the computed upper deviation rate is 7%,the sample deviation rate is 3%,and the desired confidence level is 95%.What is the allowance for sampling risk included in the computed upper deviation rate?

Correct AnswerverifiedShow Answer

Which of the following factors does an auditor generally need to consider in planning a particular audit sample for a test of controls?

Correct AnswerverifiedShow Answer

Before performing sampling procedures in an audit of controls,Sue set the tolerable deviation rate at 4.0%.After the procedures,she computes a computed upper deviation rate of 5.4%.What can Sue conclude about the entity's controls?

Correct AnswerverifiedSue must conclude that the con...View AnswerShow Answer

As a result of tests of controls,an auditor incorrectly assessed control risk too low and decreased substantive testing.This assessment occurred because the true deviation rate in the population was

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When testing automated IT controls,the auditor is most likely to do all of the following except:

Correct AnswerverifiedShow Answer

In determining the sample size for a test of controls,an auditor should consider the expected deviation rate,desired confidence level,and the

Correct AnswerverifiedShow Answer

Confidence level and sampling risk are related to sample size.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedNo,Bob cannot safely conclude that no ad...View AnswerShow Answer

An auditor plans to examine a sample of 20 checks for countersignatures as prescribed by the entity's internal control procedures.One of the checks in the chosen sample of 20 cannot be found.The auditor should consider the reasons for this limitation and

Correct AnswerverifiedShow Answer

Correct AnswerverifiedStatistical sampling permits the auditor...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Sue must conclude that the con...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
No,Bob cannot safely conclude that no ad...
View Answer

Correct Answer
verified

Correct Answer
verified
Statistical sampling permits the auditor...
View Answer