Part 1 : 03/11/17 11:52:58

Question 1 - CIA 597 1.46 - Attributes and Statistical Sampling Techniques

A bank internal auditor wishes to determine whether all loans are backed by sufficient collateral, properly aged as to
current payments, and properly categorized as current or non-current. The best audit procedure to accomplish this
objective would be to

A. Use generalized audit software to read the total loan file, age the file by last payment due, and take a statistical
sample stratified by the current and aged population. Examine each loan selected for proper collateralization and aging.
B. Take a discovery sample of all loan applications to determine whether each application contains a statement of
collateral.
C. Take a block sample of all loans in excess of a specified dollar limit and determine if they are current and properly
categorized. For each loan approved, verify aging and categorization.
D. Take a sample of payments made on the loan portfolio and trace them to loans to see that the payments are
properly applied. For each loan identified, examine the loan application to determine that the loan has proper
collateralization.

A. This is the best procedure because it takes a sample from the total loan file and tests to determine that the
loan is properly categorized as well as properly collateralized.

B. This is an inefficient audit procedure because it samples from loan applications, not loans approved.

C. This sample only deals with large dollar items and does not test for proper collateralization.

D. This would be an ineffective procedure because it is based only on loans in which payments are currently being
made -- it does not include loans that should have been categorized differently because payments are not being made.

Question 2 - CIA QZP2C.4 - Attributes and Statistical Sampling Techniques

An important difference between a statistical and a judgmental sample is that with a statistical sample,

A. A smaller sample can be used.

B. Population estimates with measurable reliability can be made.
C. More accurate results are obtained.
D. No judgment is required because everything is computed according to a formula.

A. Using statistical sampling may result in a larger sample.

B. An important difference between statistical and nonstatistical sampling is that with statistical sampling
population estimates with measurable reliability can be made. Statistical sampling provides a means of
quantitatively assessing precision and confidence level.

C. The accuracy of the results is not dependent of whether statistical or nonstatistical sampling is used.

D. Judgment is still required to determine confidence level, etc.

Question 3 - CIA 589 I.35 - Attributes and Statistical Sampling Techniques

If all other factors in a sampling plan are held constant, changing the measure of tolerable misstatement to a smaller
value will cause the sample size to be

A. Unchanged.
B. Indeterminate.

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C. Larger.
D. Smaller.

A. Changing the measure of tolerable misstatement to a smaller value will cause the sample size to be increased.

B. Changing the measure of tolerable misstatement to a smaller value will cause the sample size to be increased.

C. When using variables sampling the auditor should consider the tolerable misstatement that can be found
and still reach a satisfactory conclusion. It is important to remember that as the tolerable error decreases, the
size of the sample increases, and vice versa.

D. Changing the measure of tolerable misstatement to a smaller value will cause the sample size to be increased, not
decreased. There is an inverse relationship.

Question 4 - CIA 597 1.49 - Attributes and Statistical Sampling Techniques

An auditor has taken an attribute sample of a bank's existing loan portfolio. Out of a sample of 60 loans, the auditor
finds:
Four that were not properly collateralized,
Five that are not in compliance with bank policies (other than lack of collateralization), and
Four that were part of a related-party group, but were set up as separate loan entities.

Of the 60 loans selected in the sample, these errors were noted on a total of 10 loans. Several loans had multiple
problems.

Which of the following conclusions can the auditor reach from these findings?

I. There is sufficient evidence that fraudulent activity is taking place by one or more of the bank's lending
officers.

II. The financial statements will be misstated as a result of these actions.

III. There are significant non-compliance audit findings that should be reported.

A. I and II.
B. I and III.
C. III only.
D. II and III.

A. Although these findings are significant audit findings, there is not sufficient evidence to conclude fraudulent activity
on the part of the bank's lending officers. There must be an intent to deceive for some personal gain to infer fraud. As
for statement II, the financial statements will not necessarily be incorrect as long as the bank can determine that the
loans receivable are properly classified as to term and are carried at their net realizable value.

B. See the correct answer for the explanation.

C. These are significant audit findings and they need to be reported.

D. See the correct answer for the explanation.

Question 5 - CIA 597 II.50 - Attributes and Statistical Sampling Techniques

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Which of the following must be known to evaluate the results of an attribute sample?

A. Finite population correction factor.

B. Estimated dollar value of the population.
C. Standard deviation of the sample values.
D. Actual size of the sample selected.

A. The finite population correction factor has the ability to reduce the initial computed sample size. But, this can be
done only when more than 10% of the population is included in the sample.

B. Variables sampling is used to test the dollar value of the population not attribute sampling.

C. The standard deviation of the sample values is necessary for the variables sampling formula, not for the attribute
sampling formula.

D. The sample size of an attribute sample is influenced by the population size. The larger the population, the
larger the sample that is required. However, the population size and the sample size do not have a direct
relationship. This means that if the population doubles in size, the sample will probably not double in size as
well.

Question 6 - CIA 594 H23 - Attributes and Statistical Sampling Techniques

Management is legally required to prepare a shipping document for all movement of hazardous materials. The
document must be filed with bills of lading. Management expects 100 percent compliance with the procedure. Which of
the following sampling approaches would be most appropriate?

A. Attributes sampling.
B. Variables sampling.
C. Discovery sampling.
D. Targeted sampling.

A. Attributes sampling is too broad.

B. This type of sampling deals with monetary amounts.

C. Discovery sampling is a form of attribute sampling that is appropriate when even a single deviation
(non-compliance) is critical. Because of the legal requirements of the procedure, management expects 100%
compliance. Based on this, discovery sampling would be the most appropriate sampling approach since the
auditor is not expecting to find any deviations.

D. There is no such thing as targeted sampling.

Question 7 - CIA 597 II.46 - Attributes and Statistical Sampling Techniques

When an internal auditor's sampling objective is to obtain a measurable assurance that a sample will contain at least
one occurrence of a specific critical exception existing in a population, the sampling approach to use is

A. Probability-proportional-to-size.
B. Variables.
C. Discovery.
D. Random.

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A. PPS is a form of variables sampling in which the auditor uses the actual individual dollars within the population as
the population instead of invoices, or some other sort of identifier.

B. Variables sampling is when the auditor is testing for the amount of something, such as a transaction or account
balance. These are the substantive tests of an audit.

C. Discovery sampling is a special type of attribute sampling and it is used when are looking for any single
deviations because we are assuming that there are no mistakes in the population.

D. Random sampling will use a random number generator to select the items that are to be tested.

Question 8 - CIA 589 I.34 - Attributes and Statistical Sampling Techniques

How does stop-or-go attribute sampling differ from fixed-sample-size attribute sampling?

A. Non-sampling error is smaller.

B. Desired reliability does not have to be specified in advance.
C. It cannot be used to determine the assessed level of control risk.
D. Total expected sample size will always be smaller.

A. Nonsampling error is not going to be influenced by the sampling method.

B. Desired reliability should be specified in advance for both methods.

C. This is a principal objective of stop-or-go sampling.

D. Stop-or-go sampling tries to reduce the sample size as compared with fixed-sample-size sampling. This is
done by testing only enough items to prove that the rate of deviation is less than the acceptable rate of error.
If this first sample does not support the estimation of the population, then the sample size is enlarged until the
auditor has proven that the sample deviation is less than the tolerable deviation.

Question 9 - CIA 596 II.50 - Attributes and Statistical Sampling Techniques

The appropriate sampling plan to use to identify at least one irregularity, assuming some number of such irregularities
exist in a population, and then to discontinue sampling when one irregularity is observed is

A. Variables sampling.
B. Discovery sampling.
C. Stop-or-go sampling.
D. Attribute sampling.

A. Variables sampling is used when estimating the value of a population.

B. Discovery sampling is a special form of attribute sampling. Discovery sampling is used to when having to
"discover" at least one irregularity. Discovery sampling is used in fraud investigations.

C. Stop-or-go sampling involves discontinuing the sampling when a target error rate is achieved.

D. Only special forms of attributes samplings are discontinued when a single deviation is found.

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Question 10 - CIA 598 1.47 - Attributes and Statistical Sampling Techniques

A banks policies require that a lending officer review all loan requests and forward those deemed appropriate for
funding to the lending committee for approval. The most efficient audit procedure to determine if loans that were not
funded were rejected using criteria consistent with that contained in bank policies would be to select an attributes
sample of

A. All loan applications, review the applications, and trace them to either a funded or rejected loan to determine if all
actions taken were consistent with bank policies.
B. Loans that were funded, review the loan applications, and determine if the funded loans complied with bank policies.
C. Loans presented to the lending committee for approval and determine if actions taken by the committee were
consistent with bank policies.
D. Loans not funded and review the loan applications and the reasons for rejecting them.

A. This is an excellent procedure to determine whether all the loans (both funded and unfunded) are being handled
consistent with the stated policies and procedures. However, the audit objective only dealt with loans that were not
funded; therefore, this procedure would cause the auditors to review more loans and would not be as efficient as the
procedure noted in the correct answer.

B. This only provides information on loans that were funded. The concern is with loans that may have been
inappropriately rejected.

C. This uses a sample of loans that were presented to the lending committee. It does not include loans that would have
already been rejected by an individual lending officer.

D. This would be the most appropriate audit procedure because the audit objective only asks for a
determination that rejected loans have been rejected for proper reasons. It is not concerned with approval of
loans that should not have been made.

Question 11 - CIA 1196 2.39 - Attributes and Statistical Sampling Techniques

To test compliance with a policy regarding sales returns recorded during the most recent year, an auditor
systematically selected five percent of the actual returns recorded in March and April. Returns during these two busiest
months of the year represented about 25 percent of total annual returns. Error projections from this sample have
limited usefulness because

A. The small size of the sample relative to the population makes sampling risk unacceptable.
B. The systematic selection of returns during the two months is not sufficiently random.
C. The error rates during the two busiest months may not be representative of the whole year.
D. The failure to stratify the population according to sales volume results in bias.

A. Although sampling risk is related to sample size, it is not related to sample size relative to the population size. In
addition, this problem does not contain sufficient information to evaluate the acceptability of sampling risk.

B. Systematic selection with a random start is unbiased if the population is randomly organized.

C. The auditor has selected items from only two months. That sampling plan may enable the auditor to make
conclusions about the overall error rates during those two months, but not about error rates during the whole
year.

D. The objective of stratifying a population is to decrease the sampling risk, not to reduce bias. This problem does not
give enough information to decide whether stratification might have enabled the auditor to use a smaller sample.

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Question 12 - CIA 597 1.47 - Attributes and Statistical Sampling Techniques

A bank internal auditor wishes to determine if loans that were not funded were rejected using criteria consistent with
that contained in bank policies. All loan requests are initially processed by a lending officer.Those that the officer
deems appropriate to be funded are forwarded to the lending committee for its approval. The most efficient audit
procedure to address this objective would be to

A. Select an attribute sample of loans not funded and review the loan applications and the reasons for rejecting them.
B. Take a sample of loans presented to the lending committee for approval and determine if committee actions taken
were consistent with bank policies.
C. Select an attribute sample of loans that were funded, review the loan applications, and determine if the funded loans
complied with bank policies.
D. Take a sample of all loan applications, review the applications, and trace them to either a funded or rejected loan to
determine if all actions taken were consistent with bank policies.

A. This would be the most appropriate audit procedure because the audit objective only asks for a
determination that rejected loans have been rejected for proper reasons. It is not concerned with approval of
loans that should not have been made.

B. This uses a sample of loans that were presented to the lending committee. It does not include loans that would have
already been rejected by an individual lending officer.

C. This only provides information on loans that were funded. The concern is with loans that may have been
inappropriately rejected.

D. This is an excellent procedure to determine whether all the loans (both funded and unfunded) are being handled
consistent with the stated policies and procedures. However, the audit objective only dealt with loans that were not
funded; therefore, this procedure would cause the auditors to review more loans and would not be as efficient as the
procedure noted in the correct answer.

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