A sample in which the characteristics of the sample are the same as those of the population is a(n)
A) variables sample.
B) representative sample.
C)
... [Show More] attributes sample.
D) random sample.
B
) When the auditor decides to select less than 100 percent of the population for testing, the auditor is said to use
A) audit sampling.
B) representative sampling.
C) poor judgment.
D) estimation sampling.
A
To determine if a sample is truly representative of the population, an auditor would be required to
A) conduct multiple samples of the same population.
B) never use sampling because of the expense involved.
C) audit the entire population.
D) use systematic sample selection.
C
One of the causes of nonsampling risk is
A) choosing the wrong sample size.
B) ineffective audit procedures.
C) inadequate sample size.
D) exceptions being found in the sample
B
Which one of the choices below is most correct regarding a cause of sampling risk?
A) ineffective use of audit procedures
B) testing less than the entire population
C) use of extensive tests of controls
D) use of random sampling
B
An auditor can increase the likelihood that a sample is representative by using care in
A)
Designing the sampling process
Designing the sample selection
Yes
Yes
B)
Designing the sampling process
Designing the sample selection
No
No
C)
Designing the sampling process
Designing the sample selection
Yes
No
D) Designing the sampling process
Designing the sample selection
No
Yes
A
Which of the following is the risk that audit tests will not uncover existing exceptions in a sample?
A) sampling risk
B) nonsampling risk
C) audit risk
D) detection risk
B
Which of the following is the risk that an auditor will reach an incorrect conclusion because a sample is not representative of the population?
A) sampling risk
B) nonsampling risk
C) audit risk
D) detection risk
A
Sampling risk may be controlled by
A)
Adjusting the sample size
Using an appropriate method of selecting sample items
Yes
Yes
B)
Adjusting the sample size
Using an appropriate method of selecting sample items
No
No
C)
Adjusting the sample size
Using an appropriate method of selecting sample items
Yes
No
D)
Adjusting the sample size
Using an appropriate method of selecting sample items
No
Yes
A
Which of the following statements is most correct?
A) A sample of all items of a population will eliminate sampling risk, but increase nonsampling risk.
B) The use of an appropriate sample selection technique ensures a representative sample.
C) The auditor's failure to recognize an exception is a significant cause of sampling risk.
D) The use of inappropriate audit procedures is a significant cause of nonsampling risk.
D
One of the causes of nonsampling risk is
A) choosing the wrong sample size.
B) effective audit procedures.
C) inadequate sample size.
D) failure to recognize exceptions
D
) Sampling risk results from the auditor's failure to recognize exceptions in transaction data.
F
If an auditor does a test in the wrong direction, sampling risk will increase.
F
If a particular internal control is not followed by the client exactly 6% of the time, and the auditor's tests of that control find three control violations in a sample of 50, the sample is considered to be representative.
T
In practice, auditors do not know whether a sample is representative, even after all testing is complete
T
One way to control sampling risk is to increase sample size.
T
A sample of all items in a population will have a zero sampling risk.
T
It is virtually impossible to reduce sampling risk to zero.
T
A representative sample means the sampled items are similar to the items not sampled.
T
Assume a client's internal controls require each sales invoice to be supporting by a shipping document prepared by an outside company, but the clerk preparing sales invoices fails to follow this procedure exactly 3 percent of the time. If the auditor selects a sample of 100 sales invoices and finds two or four sales invoices are missing a shipping document, the sample is nonrepresentative of the population.
F
It is never possible to know whether a sample is truly representative of a population
F
Auditors can increase the likelihood of a sample being representative by using professional care in the design of the sampling process, in the selection of the sample, and in the evaluation of the sample results.
T
) Assume the auditor decides a control is not effective if there is a population exception rate of 3%. Assume the auditor accepts this control as effective based on test of control with a sample of 100 items that had 2 exceptions. If the population actually has a 6% exception rate, the auditor correctly accepted the population because the sample was representative of the population
F
A sample of all the items in a population still has sampling risk for the auditor
F
Using an appropriate sample selection method does not increase the likelihood of representativeness of the sample.
F
Assume an important control is shipping documents being attached to invoices. An effective audit procedure for detecting exceptions to this control would be to examine a sample of shipping documents and determining whether each is attached to a duplicate sales invoice.
T
There are three phases in both statistical and nonstatistical sampling. The first phase is to
A) generate random numbers for the sample.
B) evaluate the results.
C) plan the sample.
D) select the sample.
C
Which of the following statements is most correct concerning the quantification of sampling risk?
A) Sampling risk cannot be quantified.
B) Sampling risk can be quantified only when nonprobabilistic selection techniques are used to select the sample.
C) Sampling risk can be quantified only when probabilistic selection techniques are used to select the sample.
D) None of the above is correct.
C
Which of the following statements is most correct with respect to the evaluation of nonprobabilistic sample results?
A) It is acceptable to make nonprobabilistic evaluations only when probabilistic sample selection is used.
B) It is acceptable to make nonprobabilistic evaluations only if the auditor cannot quantify sampling risk.
C) It is never acceptable to evaluate a nonprobabilistic sample using statistical methods.
D) All of the above are correct
C
Which of the following is not a phase in the planning of both statistical and nonstatistical sampling?
A) Plan the sample.
B) Determine the probability that fraud has occurred.
C) Select the sample and perform the tests.
D) Evaluate the results.
B
Which of the following statements is not correct regarding probabilistic and nonprobabilistic sample selection?
A) In probabilistic selection, every population item has a known chance of being selected.
B) It is acceptable to evaluate a nonprobabilistic sample using statistical methods.
C) Probabilistic selection is required for all statistical sampling methods.
D) Both probabilistic and nonprobabilistic methods are acceptable and commonly used.
B
Which of the following is a correct statement regarding probabilistic versus nonprobabilistic sample selection?
A) Auditors may make nonstatistical evaluations when using probabilistic sample selection.
B) The AICPA recommends probabilistic sample selection.
C) Nonstatistical sampling can't provide results that are as effective as a statistical sample.
D) There is only one type of nonprobabilistic sample selection method.
A
) An advantage of using statistical sampling techniques is that such techniques
A) quantify sampling risk.
B) eliminate the need for judgmental decisions.
C) define the values of precision and reliability required to provide audit satisfaction.
D) have been established in the courts to be superior to judgmental sampling.
A
Auditors who prefer statistical to nonstatistical sampling believe that the principal advantage of statistical sampling flows from its ability to
A) quantify sampling risk.
B) promote a more legally defensible procedural approach.
C) define the precision required to provide audit satisfaction.
D) establish conclusive audit evidence with decreased audit effort
A
Which of the following is an accurate statement regarding sampling?
A) A 95 percent confidence level provides a 5 percent sampling risk.
B) The auditor can perform the audit tests only after the sample items are selected.
C) The purpose of planning the sample is to make sure that the audit tests are performed in a manner that provides the desired sampling risk and minimizes the likelihood of nonsampling errors.
D) All of the above are accurate statements
D
It is equally acceptable under professional auditing standards for auditors to use either statistical or nonstatistical sampling methods
T
When using nonstatistical sampling, the sample must be a probabilistic one
F
Statistical sampling differs from nonstatistical sampling in that, by applying mathematical rules, the auditor can measure sampling risk in planning the sample; however, mathematical rules cannot then be applied in evaluating the sample results.
F
A 95 percent confidence level in statistical sampling means there is more than a 5 percent sampling risk which the auditor needs to address in the sampling design.
F
A sample in which every possible combination of items in the population has an equal chance of constituting the sample is a
A) random sample.
B) statistical sample.
C) judgment sample.
D) representative sample.
A
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.
B) random sample selection.
C) systematic sample selection.
D) computerized sample selection.
C
In systematic sample selection, the population size is divided by the number of sample items desired in order to determine the
A) sampling interval.
B) tolerable exception rate.
C) computed upper exceptions rate.
D) mean.
A
appropriately used when selecting a random sample?
A)
Auditor's judgmental
selection of items
Use of random number generators
Generalized audit software
Yes
No
Yes
B)
Auditor's judgmental
selection of items
Use of random number generators
Generalized audit software
No
Yes
Yes
C)
Auditor's judgmental
selection of items
Use of random number generators
Generalized audit software
Yes
No
No
D)
Auditor's judgmental
selection of items
Use of random number generators
Generalized audit software
No
Yes
No
B
Simple random sampling
A) is used when there is a need to emphasize one or more types of population items.
B) requires both input and output parameters to be set when using a random number generator.
C) is generally used with replacement sampling.
D) is a probabilistic sampling method.
D
When a population is divided into subpopulations, usually by dollar size, and larger samples are taken from the subpopulation with the larger sizes, ________ is being used.
A) sampling with probability proportional to size
B) stratified sampling
C) block sampling
D) haphazard sampling
B
The advantage of systematic sample selection is that
A) it is easy to use.
B) there is limited possibility of it being biased.
C) it is unnecessary to determine if the population is arranged randomly.
D) it automatically selects items material to the financial statements
A
In performing a review of a client's cash disbursements, an auditor uses systematic sample selection with a random start. The primary disadvantage of this technique is population items
A) may occur twice in the sample.
B) must be reordered in a systematic pattern before the sample can be drawn.
C) may occur in a systematic pattern, thus negating the randomness of the sample.
D) must be replaced in the population after sampling to permit valid statistical inference.
C
Which of the following is a correct statement regarding block sampling?
A) It is acceptable to use block sampling only if a reasonable number of blocks are used.
B) Block sampling uses sampling with replacement.
C) Block sampling is a probabilistic sampling method.
D) There is considerable cost and time involved when block sampling is used.
A
The most serious shortcoming of the haphazard sample selection method is
A) it is not subject to statistical sampling methods.
B) it is time consuming to use.
C) it is costly to use.
D) it is difficult to remain completely unbiased in the selection.
D
Which of the following statements regarding block sampling is least likely to be true?
A) Block sampling is the selection of several items in sequence.
B) It is acceptable to use block sampling for tests of transactions only if a reasonable number of blocks is used.
C) Only one block should be selected to increase the probability of a representative sample.
D) Once the first item in the block is selected, the remainder of the block is chosen automatically.
C
When the auditor goes through a population and selects items using nonprobabilistic selection methods, without regard to their size, source, or other distinguishing characteristics, it is called
A) block sample selection.
B) haphazard selection.
C) systematic sample selection.
D) statistical selection.
B
When auditors wish to evaluate a sample statistically, an acceptable selection method is
A) systematic sample selection.
B) judgmental selection.
C) haphazard selection.
D) block sample selection
A
Which is not a method used by auditors to generate random numbers?
A) electronic spreadsheets
B) systematic sample generators
C) random number generators
D) generalized audit software
B
When selecting a sample, random numbers may be obtained either with replacement or without replacement. Although both selection methods are theoretically sound, auditors rarely use replacement sampling.
T
Although systematic sample selection is easy to use, its primary disadvantage is that it is not a probabilistic sampling method.
F
Nonprobabilistic sampling methods are not based on mathematical probabilities, and therefore the representativeness of the sample may be difficult to determine
T
The use of haphazard sample selection is encouraged under professional auditing standards.
F
Directed sample selection, block sample selection, and haphazard sample selection are three types of probabilistic sample selection methods.
F
When generating random numbers, the random numbers must be obtained with replacement
F
Sound statistical theory consistently supports random number sampling with or without replacement
T
Haphazard and block sampling are often used in situations where the nature of the data makes the data more difficult to use a probabilistic sampling method.
T
Auditors prefer to use probabilistic sample selection methods for nonstatistical sample applications involving tests of controls and substantive tests of transactions to improve the likelihood of selecting a representative sample.
T
Which of the following occurrences would be least likely to warrant further audit attention for the auditor?
A) deviations from client's established control procedures
B) deviations from client's budgeted values
C) monetary misstatements in populations of transaction data
D) monetary misstatements in populations of account balance details
B
Which of the following statements is correct when dealing with sampling for exception rates?
A) The term exception refers to both deviations from the client's control procedures and amounts that are not monetarily correct.
B) When used with sampling, the term deviation is synonymous with the term exception.
C) The actual population exception rate is the same as the sample exception rate.
D) In using audit sampling for exception rates, the auditor is most concerned with the confidence interval
A
In using audit sampling for exception rates
A) the auditor wants to know the most the exception rate is likely to be.
B) sampling error is the likelihood that the auditor will miss a monetary misstatement.
C) the upper limit of the interval estimate is known as the sampling risk.
D) the computed upper exception rate (CUER) cannot be considered in the context of specific audit objectives.
A
Which of the following is most correct when using audit sampling for exception rates?
A) The auditor is concerned with the lowest rate.
B) The auditor is concerned with the highest rate.
C) The auditor is concerned with the average on previous audits.
D) The auditor is not concerned with the exception rate for audits of nonpublic companies.
B
The upper limit of the probable population exception rate is the
A) upper exception rate.
B) estimated population exception rate.
C) computed upper exception rate.
D) tolerable exception rate
C
You are determining the significance of the following: you set a 5% risk of assessing control risk too low and your computation of the upper deviation risk is 7%. What could you conclude?
A) There is a 95% chance the deviation rate in the population is less than 5%.
B) There is a 5% chance the deviation rate in the population is less than 7%.
C) There is a 95% chance the deviation rate in the population exceeds 95%.
D) There is a 5% chance the deviation rate in the population exceeds 7%.
D
If the auditor concludes that the computer upper exception rate (CUER) is 5% at an 8% sampling risk, this means that the exception rate in the population is no greater than 5% with an 8% risk of the exception rate exceeding 5%.
T
The upper limit of the interval estimate is also known as the confidence interval.
F
Deviation refers to a departure from prescribed controls or amounts that are not monetarily correct.
F
Deviation rate and tolerable deviation are used instead of exception rate when referring to tests of controls.
T
The auditor focuses on the lower limit of the interval estimate, which is called the estimated computed lower exception rate (CLER) in tests of controls and substantive tests of transactions.
F
An auditor might conclude that the computed upper exception rate (CUER) for missing shipping documents is 4 percent at a 5 percent sampling risk, meaning the auditor concludes that the exception rate in the population is no greater than 5 percent with a 4 percent risk of the exception rate exceeding 5 percent.
F
The risk which the auditor is willing to take in accepting a control as being effective when the true population exception rate is greater than a tolerable rate is the
A) finite correction factor.
B) tolerable exception rate.
C) acceptable risk of overreliance.
D) estimated population exception rate.
C
The exception rate the auditor will permit in the population and still be willing to conclude that the control is operating effectively is the
A) tolerable exception rate.
B) estimated population exception rate.
C) acceptable risk of overreliance.
D) sample exception rate.
A
If the auditor decides to assess control risk at the moderate level in a private company audit, when in previous years the auditor set control risk at the maximum level, then tests of controls for the current year would be
A) increased in number.
B) reduced in number.
C) not performed.
D) unchanged from prior planned settings.
A
When the computed upper exception rate (CUER) is greater than the tolerable exception rate (TER), it is necessary for the auditor to take specific action. Which of the following courses of action would be most difficult to justify?
A) Reduce the tolerable exception rate so as to accept the sample results.
B) Expand the sample size and perform more tests.
C) Revise the assessed control risk upward.
D) Write a letter to management which outlines the control deficiencies.
A
Which of the following would have the least impact in determining sample size?
A) acceptable risk of overreliance
B) risk of assessing control risk too low
C) tolerable exception rate
D) population size
D
Which of the following represents the best description of the tolerable exception rate?
A) the highest exception rate the auditor will permit in the control being tested and still conclude it is operating effectively
B) the highest exception rate the auditor expects to find in the population
C) the number of exceptions found in the sample divided by the sample size
D) the highest estimated exception rate in a population at a given estimated population exception rate.
A
When analyzing exceptions, the auditor should keep in mind that
A) all exceptions must be reported to management.
B) they should determine the breakdown in the internal controls that allowed the exceptions to occur.
C) the nature of an exception and its causes have no effect on the qualitative evaluation of the system.
D) exceptions do not need to be analyzed if it is too costly.
B
The exception rate that the auditor will permit in the population and still be willing to use the preliminary control risk assessment is called the
A) acceptable exception rate.
B) estimated population exception rate.
C) sample exception rate.
D) tolerable exception rate.
D
Auditors often use the ________ to determine the estimated population exception rate.
A) current year's audit results
B) tolerable exception rate
C) preceding year's audit results
D) estimated computed by management
C
Place the following steps in their proper order:
1. Analyze exceptions.
2. Select the sample.
3. Define attributes and exception conditions.
4. State the objectives of the audit test.
5. Specify the tolerable exception rate.
A) 1, 3, 2, 4, 5
B) 4, 3, 1, 2, 5
C) 4, 3, 5, 2, 1
D) 1, 2, 3, 4, 5
C
If an auditor judgmentally selects a sample of one hundred items from a population and finds two exceptions, the auditor
A) can conclude that the sample exception rate is 2%.
B) can conclude that the population exception rate is 2%.
C) can calculate the highest exception rate expected in the population.
D) cannot make any conclusions about either the sample or the population.
A
When planning the audit sample,
A) one objective of the tests of controls is to test the effectiveness of the controls.
B) audit sampling applies to analytical procedures.
C) audit sampling generally applies to automated controls.
D) the auditor must generalize from the sample to the population.
A
Which of the following is the exception rate that the auditor expects to find before testing?
A) sample exception rate
B) estimated population exception rate
C) computed exception rate
D) tolerable exception rate
B
Which of the following is not a term related to evaluating results in audit sampling until after a sample is tested and evaluated?
A) sample exception rate
B) estimated population exception rate
C) computed upper exception rate
D) exception
B
The relationship of tolerable exception rate (TER) to sample size is
A) direct (larger TER = larger sample).
B) inverse (larger TER = smaller sample).
C) variable (sometimes larger, sometimes smaller).
D) not determinable.
B
Which of the following must be set prior to testing a sample?
A) sample exception rate
B) achieved upper precision limit
C) computed exception rate
D) tolerable exception rate
D
The acceptable risk of overreliance
A) is the risk that the auditor will erroneously conclude that the controls are less effective than they actually are.
B) is less of a concern to the auditors than the risk of underreliance.
C) represents the auditor's measure of sampling risk.
D) is determined by a statistical formula, and not by professional judgment.
C
18) The sample exception rate equals
A) the number of exceptions in the population divided by the sample size.
B) the number of items in the population multiplied by the number of exceptions in the sample.
C) the number of exceptions in the sample divided by the sample size.
D) the number of exceptions in the population divided by the population size.
C
When defining the population,
A) it may be necessary to define separate populations for different audit procedures.
B) the auditor may generalize only about the population that has been sampled.
C) auditors can define the population to include any items they want.
D) all of the above
D
One way to evaluate sampling risk when nonstatistical sampling is used is to
A) subtract the sample exception rate from the tolerable exception rate.
B) add the sample exception rate and the tolerable exception rate.
C) subtract the sample exception rate from the acceptable risk of overreliance.
D) add the sample exception rate and the acceptable risk of overreliance.
A
A danger in setting the acceptable risk of overreliance too low is
A)
The risk that the auditor is willing to take of accepting a control as
ineffective when it is effective
The risk that the auditor is willing to take of accepting a control as effective when it is ineffective
Yes
Yes
B)
The risk that the auditor is willing to take of accepting a control as
ineffective when it is effective
The risk that the auditor is willing to take of accepting a control as effective when it is ineffective
No
No
C)
The risk that the auditor is willing to take of accepting a control as
ineffective when it is effective
The risk that the auditor is willing to take of accepting a control as effective when it is ineffective
Yes
No
D)
The risk that the auditor is willing to take of accepting a control as
ineffective when it is effective
The risk that the auditor is willing to take of accepting a control as effective when it is ineffective
No
Yes
D
When using statistical sampling, the auditor would most likely require a smaller sample if the
A) population increases.
B) desired reliability decreases.
C) desired precision interval narrows.
D) expected exception rate increases.
B
Whenever auditors use sampling, they risk making incorrect conclusions about the population. The risk that the auditor concludes that controls are more effective than they actually are is known as the
A) risk of overreliance.
B) risk of underreliance.
C) risk that the sample is not representative of the population.
D) risk that the sample conclusions cannot be useful because of nonprobability sampling.
A
When choosing the appropriate acceptable risk of overreliance, the auditor needs to
A) rely on his/her professional judgment.
B) err on the side of conservatism.
C) consult the professional standards.
D) follow SEC guidelines.
A
When planning the audit sample, the ________ is (are) those items about which the auditor wishes to generalize.
A) attributes
B) sampling unit
C) population
D) sample
C
If the result obtained from a particular sample for control and substantive tests of transactions is critical to the formation of an audit opinion, which of the following is the most important to the auditor in concluding of the appropriateness and sufficiency of evidence gathered?
A) acceptable risk of overreliance
B) estimated population exception rate
C) tolerable exception rate
D) size of the population
A
) There is a(n) ________ relationship between acceptable risk of overreliance and planned sample size.
A) direct
B) inverse
C) proportional
D) exponential
B
Which of the following results in a larger sample size?
A) Decrease the estimated population exception rate and decrease the tolerable exception rate.
B) Increase the estimated population exception rate and decrease the tolerable exception rate.
C) Decrease the estimated population exception rate and increase the tolerable exception rate.
D) Increase the estimated population exception rate and increase the tolerable exception rate.
B
When determining tolerable exception rate (TER),
A) the auditor considers the degree of reliance to be placed on the control and the significance of the control to the audit.
B) if only one internal control is used to support a low control risk assessment for an objective, TER will be higher for the attribute than if multiple controls are used to support a low control risk assessment for the same objective.
C) control deviations increase both the risk of material misstatements in the accounting record, and will always result in misstatements.
D) a smaller sample size is needed for a low TER than for a high TER.
A
The acceptable risk of overreliance
A) is normally assessed at a high level when auditing an accelerated filer public company.
B) and the extent of tests of controls depend on assessed control risk for accelerated filer public companies.
C) and the control risk will be assessed as low for audits where there is extensive reliance on internal controls.
D) does not impact the effectiveness of the audit.
C
The auditor must use the same TER and ARO levels for all attributes of an audit test.
F
The tolerable exception rate is the rate that the auditor will permit in the population and still be willing to conclude a control is effective.
T
The only way to know with certainty whether a sample is representative is to subsequently audit the entire population.
T
Acceptable risk of overreliance is the risk that the auditor is willing to take in accepting a control as effective when the true population exception rate is greater than the estimated population exception rate.
F
Acceptable risk of overreliance is normally lower for a public company audit than a private company audit.
T
When the estimated population exception rate exceeds the sample exception rate, the auditor can conclude that the sample results do not support the preliminary assessed control risk.
F
When the sample exception rate is greater than the tolerable exception rate in attributes sampling, one possible appropriate course of action is to increase sample size.
T
Tolerable exception rate (TER) is inversely related to sample size.
T
When the sample exception rate (SER) exceeds the tolerable exception rate (TER), the auditor should decide whether to increase sample size or to revise assessed control risk on the basis of cost versus benefit.
F
In nonstatistical sampling, the calculated sampling error is the difference between the tolerable exception rate and the sample exception rate.
T
The sampling unit is the physical unit that corresponds to the random numbers the auditor generates.
T
The sum of the tolerable exception rate and the estimated population exception rate is the precision of the initial sample estimate.
F
Audit sampling can be applied for reviewing sales transactions for large and/or unusual amounts, and also for observing whether the duties and responsibilities of the receivables clerk are separate from the handling of cash (a test of control).
F
Audit sampling can be applied to manual controls when application of the control produces documentary evidence of performance.
T
When audit evidence is in electronic format, the auditor can use data analytics to test the entire population, rather than testing a sample of the population.
T
The auditor uses professional judgment in establishing the tolerable exception rate for an attribute being tested in a population.
T
As the auditor performs statistical procedures and finds material weaknesses in internal controls, it is important to communicate in writing to those at the audit client charged with governance.
T
The auditor finds material weaknesses in internal controls before year end. In these situations, the auditor must issue an adverse opinion in the audit report on internal controls, even if the auditor is able to test management's corrected controls before year-end.
F
Rodgers CPA believes that the rate of client billing errors is 4% and has established a tolerable deviation rate of 6%. In auditing client invoices, Rodgers should use
A) stratified sampling.
B) classical sampling.
C) proportional sampling.
D) attributes sampling.
D [Show Less]