Chapter 15 Flashcards
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. attributes sample.
d. random sample.
b. representative sample.
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. audit sampling.
In practice, auditors _________ know if a sample is truly a representative one.
a. sometimes
b. often
c. routinely
d. never
d. never
To determine if a sample is truly representative, an auditor must:
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. audit the entire population.
One of the ways to eliminate nonsampling risk is through:
a. proper supervision and instruction of the client’s employees.
b. proper supervision and instruction of the audit team.
c. the use of attributes sampling rather than variables sampling.
d. controls which ensure that the sample drawn is random and representative.
b. proper supervision and instruction of the audit team.
One cause of nonsampling risk is:
a. ineffective use of audit procedures.
b. testing less than the entire population.
c. use of extensive tests of controls.
d. the possibility that a properly-selected sample still may not be representative.
a. ineffective use of audit procedures.
An auditor can increase the likelihood that a sample is representative by using care in:
(Designing the sampling process / Designing the sample selection)
a. Yes Yes
b. No No
c. Yes No
d. No Yes
a. Yes Yes
When the auditor goes through a population and selects items for the sample 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. haphazard selection.
When auditors wish to evaluate a sample statistically, the only acceptable selection method is:
a. probabilistic selection.
b. judgmental selection.
c. haphazard selection.
d. block sample selection.
a. probabilistic selection.
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. random sample.
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. systematic sample selection.
________ 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. Nonsampling risk.
________ 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
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. sampling interval.
Sampling risk may be controlled by: (Adjusting the sample size / Always using random sampling) a. Yes Yes b. No No c. Yes No d. No Yes
c. Yes No
Which of the following occurrences would be least likely to attract the auditor’s attention?
a. Deviations from client’s established control procedures.
b. Deviations from client’s budgeted values.
c. Monetary errors in populations of transaction data.
d. Monetary errors in populations of account balance details.
b. Deviations from client’s budgeted values.
Which of the following statements is 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. The use of inappropriate audit procedures is a significant cause of nonsampling risk.
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 assessing control risk too low.
d. estimated population exception rate.
c. acceptable risk of assessing control risk too low.
The exception rate the auditor will permit in the population and still be willing to reduce the assessed level of control risk is called the:
a. tolerable exception rate.
b. estimated population exception rate.
c. acceptable risk of overreliance.
d. sample exception rate.
a. tolerable exception rate.
If the auditor decides to assess control risk at the maximum level in a private company audit, tests of controls are:
a. increased in number.
b. reduced in number.
c. not performed.
d. unchanged from prior planned settings.
c. not performed.
Which of the following is not one of the basic phases in audit sampling?
a. Planning the sample
b. Evaluating the results of the sample
c. Selecting the sample and performing the tests d. Each of the above is a phase in audit sampling.
d. Each of the above is a phase in audit sampling.
Attributes sampling would be an appropriate method to use on which one of the following procedures in an audit program?
a. Review sales transactions for large and unreasonable amounts.
b. Observe whether the duties of the accounts receivable clerk are separate from handling cash.
c. Examine a sample of duplicate sales invoices for credit approval by the credit manager.
d. Review the aged schedule of accounts receivable to determine if receivables from officers
are included.
c. Examine a sample of duplicate sales invoices for credit approval by the credit manager.
When the computed upper exception rate is greater than the tolerable exception rate, it is necessary for the auditor to take specific action. Which of the following courses of action would be most difficult to defend if the auditor is ever subject to review by a court?
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.
d. Write a letter to management which outlines the control deficiencies.
a. Reduce the tolerable exception rate so as to accept the sample results.
Which of the following is not generally considered in determining sample size for tests of controls?
a. Expected population exception rate.
b. Risk of assessing control risk too low.
c. Tolerable exception rate.
d. Population size.
d. Population size.
Which of the following statement is correct with respect to the quantification of sampling risk?
a. Sampling risk cannot be quantified.
b. Sampling risk can be quantified only when non-probabilistic 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.
c. Sampling risk can be quantified only when probabilistic selection techniques are used to
select the sample.
The auditor may use which of the following criteria when using the directed sample selection technique?
a. Items most likely to contain misstatements.
b. Items containing selected population characteristics.
c. Large dollar coverage.
d. Any of the above.
d. Any of the above.
Non-sampling errors occur when audit tests do not uncover existing exceptions in the:
a. population.
b. sample.
c. planning stage.
d. financial statements.
b. sample.
Which of the following statements is correct with respect to the evaluation of sample results?
a. It is acceptable to make non-probabilistic evaluations only when probabilistic sample
selection is used.
b. It is acceptable to make non-probabilistic evaluations only if the auditor cannot quantify sampling risk.
c. It is never acceptable to evaluate a non-probabilistic sample as if it were a statistical one. d. All of the above are correct.
c. It is never acceptable to evaluate a non-probabilistic sample as if it were a statistical one.
Which of the following statements is a valid criticism of non-statistical sampling?
a. Many audit tests, such as footing of journals, must be performed outside a statistical
sampling context.
b. The cost of performing random selection or testing often exceeds the benefits.
c. Non-statistical sampling does not differ substantially from statistical sampling methods.
d. Conclusions may be drawn in more precise ways when using statistical sampling methods.
d. Conclusions may be drawn in more precise ways when using statistical sampling methods.
Which of the following methods of sample selection is appropriately used when selecting a random sample?
Correspondence is established between the random number table and the population by:
(Auditor’s judgmental selection of items / Use of computer-generated random numbers / Use of random number tables)
a. Yes No Yes
b No Yes Yes
c. Yes No No
D. No Yes No
b No Yes Yes
