Audit Sampling

Question 1

178. Audit sampling involves the

A. Selection of all items over a certain amount.
B. Application of audit procedures to less than 100% of items within a class of transactions or an account balance such that all items have a chance of selection.
C. Application of audit procedures to all items that comprise a class of transactions or an account balance.
D. Application of audit procedures to all items over a certain amount and those that are unusual or have a history of error.

Answer 1

B. Application of audit procedures to less than 100% of items within a class of transactions or an account balance such that all items have a chance of selection.

Question 2

179. Population, as defined in PSA 530, means the entire set of data from which a sample is selected and about which the auditor wishes to draw conclusions. It is important for the auditor to ensure that the population is
     I. Appropriate to the objective of the audit procedure.
     II. Complete.

A. I only C. Both I and II
B. II only D. Neither I nor II

Answer 2

C. Both I and II

Question 3

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

A. Afford greater assurance than a nonstatistical sample of equal size.
B. Provide an objective basis for quantitatively evaluating sampling 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.

Answer 3

B. Provide an objective basis for quantitatively evaluating sampling risks.

Question 4

181. 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.

Answer 4

A. A randomly chosen sample may not be representative of the population as a whole on the characteristic of interest.

Question 5

182. 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

Answer 5

C. Block selection

Question 6

183. Which of the following combinations results in a decrease in sample size in a sample for attributes?
     Risk of Expected
     assessing Tolerable population
     control risk too low rate deviation rate

A. Increase Decrease Increase
B. Decrease Increase Decrease
C. Increase Increase Decrease
D. Increase Increase Increase

Answer 6

C. Increase Increase Decrease

Question 7

184. The diagram below depicts the auditor’s estimated maximum deviation rate compared with the tolerable rate and also depicts the true population deviation rate compared with the tolerable rate.
     True State of Population
     Auditor’s
     Estimate Deviation Rate Deviation Rate Based on Is less than Exceeds
     Sample Results Tolerable Rate Tolerable Rate

Maximum
Deviation Rate I. III.
Is Less than
Tolerable Rate

Maximum
Deviation Rate II. IV.
Exceeds
Tolerable Rate

	As a result of tests of controls, the auditor assesses control risk higher than necessary and thereby increases substantive testing.  This is illustrated by

A. I C. III
B. II D. IV

Answer 7

B. II