Audit Sampling

Question 1

While performing a test of details during an audit, an auditor determined that the sample results supported the conclusion that the recorded account balance was materially misstated. It was, in fact, not materially misstated.

This situation illustrates the risk of
	A.  	Assessing control risk too high.
	B.  	Assessing control risk too low.
	C.  	Incorrect rejection.
	D.  	Incorrect acceptance

Answer 1

C - Deciding that the sample results support the conclusion that the balance is materially misstated when it is not is an illustration of the risk of incorrect rejection. As a result, the auditor will perform additional and unnecessary work.

Question 2

Which of the following statements about audit sampling risks is correct for a nonissuer?
A. Nonsampling risk arises from the possibility that, when a substantive test is restricted to a sample, conclusions might be different than if the auditor had tested each item in the population.
B. Nonsampling risk can arise because an auditor failed to recognize misstatements.
C. Sampling risk is derived from the uncertainty in applying audit procedures to specific risks.
D. Sampling risk includes the possibility of selecting audit procedures that are not appropriate to achieve the specific objective

Answer 2

B - Nonsampling risk refers to any error unrelated to sampling risk that the auditor might commit when performing an audit sampling task, such as failing to recognize a misstatement or otherwise misinterpreting the audit evidence

Question 3

To determine the sample size for a test of controls, an auditor should consider the tolerable deviation rate, the allowable risk of assessing control risk too low, and the
	A.  	Expected deviation rate.
	B.  	Upper precision limit.
	C.  	Risk of incorrect acceptance.
	D.  	Risk of incorrect rejection

Answer 3

A - To determine the sample size for a test of controls, the auditor considers the tolerable deviation rate, the allowable risk of assessing control risk too low, and the expected deviation rate. The auditor also considers the relationship of the sample to the objective of the test of controls.

Question 4

In statistical sampling methods used in substantive testing, an auditor most likely would stratify a population into meaningful groups if
A. Probability proportional to size (PPS) sampling is used.
B. The population has highly variable recorded amounts.
C. The auditor’s estimated tolerable misstatement is extremely small.
D. The standard deviation of recorded amounts is relatively small

Answer 4

B