AUD-Sampling

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1. Correct: (A) The likelihood of assessing control risk too high is the risk that the sample selected to
Assessing control risk too high means test controls
evidence gained doesn't support the A. Does not support the auditor's planned assessed level of control risk when the true
assessed risk level because the operation is operating effectiveness of the control structure justifies such an assessment
effective. B. Contains misstatements that could be material to the financial statements when
aggregated with
misstatements in other account balances or transactions classes.
C. Contains proportionately fewer monetary errors or deviations from prescribed
internal controls than exist
in the balance or class as a whole.
D. Does not support the tolerable error for some or all of management's assertions.
2. Correct: (C) While performing a test of details during an audit, an auditor determined that the
Incorrect rejection=audit efficiency sample results supported the conclusion that the recorded account balance was
Incorrect acceptance=audit effectiveness materially misstated. It was, in fact, not materially misstated. This situation illustrate the
risk of
A. Assessing control risk too high
B. Assessing control risk too low
C. Incorrect rejection
D. Incorrect acceptance
3. Correct: (B) Which of the following statistical sampling plans does not use a fixed sample size for
Sequential sampling=stop-or-go=selected tests of controls?
in several steps A. Dollar-unit sampling
B. Sequential sampling
C. PPS sampling
D. Variables sampling
4. Correct: (D) As a result of test of controls, an auditor assessed control risk too low and decreased
Question: why assessed control risk too low substantive testing. This assessment occurred because the true deviation rate in the
population was
A. Less than the risk of assessing control risk too low, based on the auditor's sample.
B. Less than the deviation rate in the auditor's sample.
C. More than the risk of assessing control risk too low, based on the auditor's sample.
D. More than the deviation rate in the auditor's sample
5. Correct: (D) The objective of the tolerable rate in sampling for tests of controls of internal control
is to
A. Determine the probability of 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. Estimate the range of procedural deviation in the population
6. deviation rate=3/50=6% What is an auditor's evaluation of a statistical sample for attributes when a test of 50
Upper limits rate=deviation rate+allowance results of 3 deviation is tolerable rate is 7%, the expected population deviation rate is
for sampling risk=6%+2%=8%>tolerable 5%, and the allowance for sampling risk is 2%
deviation rate
7. Increase in tolerable How would increases in tolerable misstatement and assessed level of control risk
misstatement=Decrease sample size affect the sample size in a substantive test of details?
Increase in assessed level of control
risk=Increase sample size
8. Correct: (C) In estimation sampling for variables, which of the following must be known in
(A) qualitative aspects of errors don't need order to estimate the appropriate sample size required to meet the auditor's
sample size needs in a given situation?
(B) variable sampling is to estimate the audit A. The qualitative aspects of errors.
dollar amount, BV of population doesn't need to B. The total dollar amount of the population
know C. The acceptable level of risk
(D)Rate of error in population relates to attribute D. The estimated rate of misstatements in the population.
sampling
9. Correct: (A) An auditor established a $60,000 tolerable misstatement for an asset with an
Projected misstatement account balance of $1,000,000.
20X($3,700-$200)=$7,000>Tolerable The auditor selected a sample of every twentieth item from the population that
misstatement=$6,000 represented the asset account
balance and discovered overstatements of $3,700 and understatements of $200.
Under these circumstances,
the auditor most likely would conclude that:
a. There is an unacceptably high risk that the actual misstatements in the
population exceed the tolerable
misstatement because the total projected misstatement is more than the
tolerable misstatement.
b. There is an unacceptably high risk that the tolerable misstatement exceeds the
sum of actual overstatements
and understatements.
c. The asset account is fairly stated because the total projected misstatement is
less than the tolerable
misstatement.
d. The asset account is fairly stated because the tolerable misstatement exceeds
the net of projected actual
overstatements and understatements.
10. Correct: (C) Which of the following statements is correct concerning probability proportional
(A) no normal distribution to size (PPS) sampling, also
(B) The dollar value decided probability of known as dollar unit sampling?
sample selection a. The sampling distribution should approximate the normal distribution .
(D) Sampling interval=BV of population/sample b. Overstated units have a lower probability of sample selection than units that
size 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.
11. When an account's recorded amount exceeds In a PPS sample with a sampling interval of $5,000, an auditor discovered that a
the sampling interval, the projected error equals selected account receivable with a recorded amount of $10,000 had an audit
the actual misstatement=$2,000= amount of $8,000. If this were the only error discovered by the auditor, the
($10,000-$8,000) projected error of this sample would be
12. Correct: (A) The use of the ratio estimation sampling technique is most effective when
When the sample amounts are proportional to A. The calculated audit amounts are approximately proportional to the client's
the client's amount, it will result a small number book amount
of differences in the population and then results B. A relatively small number of differences exist in the population
in an effective way.
13. Correct: (C)
300,000/250,000*5,000,000=6,000,000
14. Correct: (D)
Ratio estimation is appropriate when
testing a population for which a large
number of errors of this nature is
expected.
(A) used in a larger population
(B) PPS is ore efficient for testing
populations with relatively low
expected errors rates.
(C)Stop and go are used in attribute
sampling
15. Correct: (D)
Differences between sample values
and BV are dollar amount, regardless
of account size.
Using statistical sampling to assist in verifying the year-end accounts payable balance, an
auditor has accumulated the following data:
Balance
Number of Book determined by
accounts balance the auditor
Population: 4,100 $5,000,000 ?
Sample: 200 $ 250,000 $300,000
Using the ratio estimation technique, the auditor's estimate of year-end accounts payable
balance would be
a. $5,050,000.
b. $5,125,000.
c. $6,000,000.
d. $6,150,000.
An auditor is performing substantive tests of pricing and extensions of perpetual inventory
balances consisting of a large number of items. Past experience indicates numerous pricing
ans extension errors. Which of the following statistical sampling approaches is most
appropriate?
A. Unstratified mean-per-unit
B. PPS
C. Stop or go
D. Ratio estimation.
The major reason that the difference and ratio estimation methods would be expected to
produce audit efficiency is that the
A. Number of members of the population of differences or ratios is smaller than the
number of members of the population of BV
D. Variability of the populations of differences or ratios is less than that of the populations
of book values or audited values.