C8P1 Tools to Gather Audit Evidence

Question 1

State all content information.
Do all audits involve sampling?
7
4
4

Answer 1

1) Do all audits involve sampling?
2) Why need sample?
3) What is the objective of sampling when testing account balances?
4) Is it easy to design a judgmental sample?
5) What are the four (4) other approaches?
6) What are the five (5) financial statement assertions?
7) What is audit sampling?

1) What are the four (4) reasons why auditors use sampling to gather evidence?
2) Is sampling always the best approach in auditing?
3) Should an auditor sample immaterial account balances?
4) Can auditor makes an inference about the underlying population from the result of sampling?

1) What are the four (4) important decisions an auditor needs to make, to ensure the sample is representative of the population?
2) What is non-sampling and sampling risk?
3) What is non-sampling risk?
4) What is sampling risk?

Question 2

Fill in the blanks

1) Do all audits involve —?
2) Why need —?
3) What is the objective of — when — account —?
4) Is it — to — a — sample?
5) What are the four (4) other —?
6) What are the five (5) financial statement —?
7) What is audit —?

Answer 2

1) Do all audits involve sampling?
2) Why need sample?
3) What is the objective of sampling when testing account balances?
4) Is it easy to design a judgmental sample?
5) What are the four (4) other approaches?
6) What are the five (5) financial statement assertions?
7) What is audit sampling?

Question 3

Fill in the blanks

1) What are the four (4) — why auditors use — to gather evidence?
2) Is sampling always the — — in auditing?
3) Should an auditor sample — account balances?
4) Can auditor makes an — about the underlying population from the — of sampling?

Answer 3

1) What are the four (4) reasons why auditors use sampling to gather evidence?
2) Is sampling always the best approach in auditing?
3) Should an auditor sample immaterial account balances?
4) Can auditor makes an inference about the underlying population from the result of sampling?

Question 4

Fill in the blanks

1) What are the four (4) important — an auditor needs to make, to — the sample is — of the population?
2) What is — and — risk?
3) What is — risk?
4) What is — risk?

Answer 4

1) What are the four (4) important decisions an auditor needs to make, to ensure the sample is representative of the population?
2) What is non-sampling and sampling risk?
3) What is non-sampling risk?
4) What is sampling risk?

Question 5

Do all audits involve sampling?

Answer 5

All audits involve sampling because the auditor cannot examine 100% of the transactions during a period.

Question 6

Do all audits involve sampling?

— audits involve sampling because the auditor — — —% of the transactions during a —.

Answer 6

All audits involve sampling because the auditor cannot examine 100% of the transactions during a period.

Question 7

Why need sample?

Answer 7

The answer is that an auditor needs an efficient and effective way to reach a judgment about a population that is too large to examine completely.

Question 8

Why need sample?

The answer is that an auditor needs an — and — way to reach a — about a — that is too — to examine —.

Answer 8

The answer is that an auditor needs an efficient and effective way to reach a judgment about a population that is too large to examine completely.

Question 9

What is the objective of sampling when testing account balances?

Answer 9

The objective of sampling when testing account balances is to estimate the amount of misstatement in an underlying population to determine whether the controls are working effectively.

Question 10

What is the objective of sampling when testing account balances?

The objective of sampling when — account — is to — the — of — in an underlying — to — whether the — are working —.

Answer 10

The objective of sampling when testing account balances is to estimate the amount of misstatement in an underlying population to determine whether the controls are working effectively.

Question 11

Is it easy to design a judgmental sample?

Answer 11

It is difficult to design a judgmental sample that could be considered more effective or more efficient than a well-designed statistical sample.

Question 12

Is it easy to design a judgmental sample?

It is — to design a — sample that could be considered more — or more — than a well—- — sample.

Answer 12

It is difficult to design a judgmental sample that could be considered more effective or more efficient than a well-designed statistical sample.

Question 13

What are the four (4) other approaches?

Answer 13

1) Computerized footing of the account balance
2) Sampling to test valuation
3) Analytical review to determine potential obsolescence
4) Tests of a block of transactions review for cutoff tests

Question 14

What are the four (4) other approaches?

1) — — of the — —
2) — to — —
3) — — to — potential —
4) — of a — of transactions — for — tests

Answer 14

1) Computerized footing of the account balance
2) Sampling to test valuation
3) Analytical review to determine potential obsolescence
4) Tests of a block of transactions review for cutoff tests

Question 15

What are the five (5) financial statement assertions?

Answer 15

1) Existence
2) Completeness
3) Rights
4) Valuation or allocation
5) Presentation and disclosure

Question 16

What are the five (5) financial statement assertions?

1) —
2) —
3) —-
4) —- or —
5) — and —

Answer 16

1) Existence
2) Completeness
3) Rights
4) Valuation or allocation
5) Presentation and disclosure

Question 17

What is audit sampling?

Answer 17

It is defined as applying audit procedures to less than 100 percent of a population in order to estimate some characteristic about that population.

Question 18

What is audit sampling?

It is defined as — audit — to — than 100 percent of a population in order to — some — about that —.

Answer 18

It is defined as applying audit procedures to less than 100 percent of a population in order to estimate some characteristic about that population.

Question 19

It is defined as applying audit procedures to less than 100 percent of a population in order to estimate some characteristic about that population.

Answer 19

Audit sampling

Question 20

What are the four (4) reasons why auditors use sampling to gather evidence?

Answer 20

• Auditors use sampling to gather evidence to:

1) Test controls for the purpose of expressing an opinion on the client’s internal controls.

2) Test controls for the purpose of assessing control risk.

3) Test for compliance with company policies, governmental regulations, or other criteria.

4) Test individual items in account balances as a basis for determining whether material misstatements exist in the account balance

Question 21

What are the four (4) reasons why auditors use sampling to gather evidence?

• Auditors use — to gather evidence to:

1) Test — for the purpose of — an —- on the client’s — —.

2) Test — for the purpose of – control —.

3) Test for — with company —, — —, or other —.

4) Test — — in account —- as a basis for — whether — — — in the account —

Answer 21

What are the four (4) reasons why auditors use sampling to gather evidence?
- Auditors use sampling to gather evidence to:

1) Test controls for the purpose of expressing an opinion on the client’s internal controls.

2) Test controls for the purpose of assessing control risk.

3) Test for compliance with company policies, governmental regulations, or other criteria.

4) Test individual items in account balances as a basis for determining whether material misstatements exist in the account balance

Question 22

Is sampling always the best approach in auditing?

Answer 22

• In some cases, sampling may not be the best approach.
• Some audit procedures do not provide sufficient evidence when applied on a sample basis

For example: auditors read minutes of all BOD meetings to identify related party transactions.

Reading the minutes of a sample of BOD meetings would not be sufficient

Question 23

Is sampling always the best approach in auditing?

• In — cases, sampling may — be the — approach.
• Some audit — do — provide — evidence when applied on a — basis

For example: auditors read — of all — meetings to identify related party transactions.

Reading the minutes of a — of BOD meetings would — be —

Answer 23

• In some cases, sampling may not be the best approach.
• Some audit procedures do not provide sufficient evidence when applied on a sample basis

For example: auditors read minutes of all BOD meetings to identify related party transactions.

Reading the minutes of a sample of BOD meetings would not be sufficient

Question 24

Should an auditor sample immaterial account balances?

Answer 24

Account balances that are immaterial (or where the potential misstatement is immaterial) may not be worth sampling. Such accounts may be audited more efficiently with analytics.

Question 25

Should an auditor sample immaterial account balances?

Account — that are — (or where the — misstatement is —) may not be — sampling. Such accounts may be — more — with —.

Answer 25

Account balances that are immaterial (or where the potential misstatement is immaterial) may not be worth sampling. Such accounts may be audited more efficiently with analytics.

Question 26

Can auditor makes an inference about the underlying population from the result of sampling?

Answer 26

• Yes, from the results of sampling, the auditor can make an inference about the underlying population.
• For this inference to be valid, the sampling units tested must be representative of the underlying population.

Question 27

Can auditor makes an inference about the underlying population from the result of sampling?

• —, from the — of sampling, the auditor can make an — about the — population.
• For this — to be —, the sampling — — must be — of the underlying population.

Answer 27

• Yes, from the results of sampling, the auditor can make an inference about the underlying population.
• For this inference to be valid, the sampling units tested must be representative of the underlying population.

Question 28

What are the four (4) important decisions an auditor needs to make, to ensure the sample is representative of the population?

Answer 28

• The auditor needs to make four important decisions to ensure the sample is representative and to control against making an incorrect inference:

1) Which population should be tested and for what characteristics? (population)

2) How many items should be selected for audit testing? (Sample size)

3) Which items should be included in the sample? (selection)

4) What inferences can be made from the sample? (evaluation)

Question 29

What are the four (4) important decisions an auditor needs to make, to ensure the sample is representative of the population?
- The auditor needs to make — important — to — the sample is — and to — against making an — inference:

1) — population should be — and for what —? (—)

2) — — — should be — for audit testing? (Sample —)

3) — — should be — in the sample? (—)

4) What — can be — from the sample? (—)

Answer 29

• The auditor needs to make four important decisions to ensure the sample is representative and to control against making an incorrect inference:

1) Which population should be tested and for what characteristics? (population)

2) How many items should be selected for audit testing? (Sample size)

3) Which items should be included in the sample? (selection)

4) What inferences can be made from the sample? (evaluation)

Question 30

What is non-sampling and sampling risk?

Answer 30

• When auditors draw an erroneous inference from sampling, the cause is either non-sampling or sampling risk.

Question 31

What is non-sampling and sampling risk?

When auditors — an — — from sampling, the cause is either — or — risk.

Answer 31

When auditors draw an erroneous inference from sampling, the cause is either non-sampling or sampling risk.

Question 32

What is non-sampling risk?

Answer 32

• It occurs when auditor does not appropriately carry out audit procedures or misinterprets results
• It results from human error. It cannot be quantified. CPA firms try to minimize it through quality control practices.

Question 33

What is non-sampling risk?

• It occurs when auditor does — — carry — audit — or — —
• It results from — —. It cannot be —. CPA firms try to — it through — — practices.

Answer 33

• It occurs when auditor does not appropriately carry out audit procedures or misinterprets results
• It results from human error. It cannot be quantified. CPA firms try to minimize it through quality control practices.

Question 34

• It occurs when auditor does not appropriately carry out audit procedures or misinterprets results
• It results from human error. It cannot be quantified. CPA firms try to minimize it through quality control practices.

Answer 34

Non-sampling risk

Question 35

• It occurs when auditor does not appropriately carry out audit procedures or misinterprets results

Answer 35

Non-sampling risk

Question 36

• It results from human error. It cannot be quantified. CPA firms try to minimize it through quality control practices.

Answer 36

Non-sampling risk

Question 37

What is sampling risk?

Answer 37

• It occurs when sample is not representative of the underlying population
• It can be controlled through sample size – as sample size increases, sampling risk decreases
• If the sample is 100% of the population, sampling risk is zero; however, this is often not practical

Question 38

What is sampling risk?

• It occurs when — is — — of the — population
• It can be — through sample — – as sample — —, sampling — —
• If the sample is —% of the population, sampling risk is —; however, this is often — —

Answer 38

• It occurs when sample is not representative of the underlying population
• It can be controlled through sample size – as sample size increases, sampling risk decreases
• If the sample is 100% of the population, sampling risk is zero; however, this is often not practical

Question 39

• It occurs when sample is not representative of the underlying population
• It can be controlled through sample size – as sample size increases, sampling risk decreases
• If the sample is 100% of the population, sampling risk is zero; however, this is often not practical

Answer 39

Sampling risk

Question 40

• It occurs when sample is not representative of the underlying population

Answer 40

Sampling risk

Question 41

• It can be controlled through sample size – as sample size increases, sampling risk decreases
• If the sample is 100% of the population, sampling risk is zero; however, this is often not practical

Answer 41

Sampling risk