Chapter 15: Audit Sampling ofr Tests of Controls and Substantive Tests of Transactions

Question 1

A ___________ _________ is one in which the characteristics in the sample of audit interest are approximately the same as those of the population.

Answer 1

representative sample

Question 2

What two things can cause a sampling result to be nonrepresentative?

Answer 2

nonsampling error and sample error

Question 3

__________ _____ is the risk that audit tests do not uncover existing exceptions in the sample

Answer 3

nonsampling risk

Question 4

Two causes of nonsampling risk are:
Auditor’s failure to recognize _________
Inappropriate or ineffective audit ________

Answer 4

exceptions

procedures

Question 5

_________ _____ is the risk that an auditor reaches an incorrect conclusion because the sample is not representative of the population.

Answer 5

sampling risk

Question 6

Two ways to control sampling risk are:
Adjust sample ___

Use an appropriate method to select _______ items from the population

Answer 6

size

sample

Question 7

Both statistical and nonstatistical sampling have these categories in common:

1) _______ the sample
2) select the sample and _______ the tests
3) Evaluate the_______

Answer 7

Plan
perform
results

Question 8

___________ __________ allows the quantification of sampling risk in planning the sample and evaluating the results.

Answer 8

statistical sampling

Question 9

In ___________ ________ those items that the auditor believes will provide the most useful information are selected.

Answer 9

nonstatistical sampling

Question 10

Which sample selection method does this refer to:
each population item has a known probability of being included in the sample and the sample is selected by random process

Answer 10

probabilistic

Question 11

Which sample selection method does this refer to:

the auditor uses professional judgment rather than probabilistic methods to select sample items

Answer 11

nonprobabilistic

Question 12

These are examples of probabilistic sample selection methods:
_______ random sample selection
________ sample selection
___________ proportional to size sample selection
_________ sample selection

Answer 12

simple
systematic
probability
stratified

Question 13

Nonprobabilistic sample selection methods include what 3?

Answer 13

directed, block, and haphazard sample selection

Question 14

In a ________ _________ sample, every possible combination of items has an equal chance of being included in the sample. There are random number tables and computer generation of random numbers.

Answer 14

simple random

Question 15

In _______ sample selection, the auditor calculates an interval and then selects the items for the sample based on the size of the interval. The interval is determined by dividing the population size by the number of sample items desired.

Answer 15

systematic

Question 16

In ________ _______ to Size, a sample is taken where the probability of selecting any individual population item is proportional to its recorded amount (PPS)

Answer 16

probability proportional

Question 17

in ________ sample selection, the population is divided into subpopulations by size and larger samples are taken of the larger subpopulations.

Answer 17

stratified

Question 18

In regards to nonprobabilistic sample selection methods: ______ sample selection is: item selection based on audit judgmental criteria:

1) items most likely to contain misstatements
2) items containing selected population characteristics
3) large dollar coverage

Answer 18

directed

Question 19

In regards to nonprobabilistic sample selection methods:

_______ sample selection is the selection of several items in sequence

Answer 19

block

Question 20

in regards to nonprobablistic sample selection methods:

_______ sample selection is the selection of items without any conscious bias by auditor

Answer 20

haphazard

Question 21

With regards to terms related to Planning:

the characteristic being tested in the population

Answer 21

characteristic or attribute

Question 22

With regards to terms related to Planning:
the risk the auditor is willing to take of accepting a control as effective or a rate of monetary misstatements as tolerable, when the true population exception rate is greater than the tolerable exception rate

Answer 22

acceptable risk of overreliance

Question 23

With regards to terms related to Planning:
exception rate that the auditor will permit in the population and still be willing to conclude the control is operating effectively and/or the amount of monetary misstatements in the transactions established during planning is acceptable

Answer 23

tolerable exception rate

Question 24

With regards to terms related to Planning:

exception rate that the auditor expects to find in the population before testing begins

Answer 24

estimated population exception rate

Question 25

With regards to terms related to Planning:

sample size decided after considering the factors in planning

Answer 25

initial sample size

Question 26

With regards to terms related to evaluating results:

exception from the attribute in the sample

Answer 26

exception

Question 27

with regards to terms related to evaluating results:

number of exceptions in the sample divided by the sample size

Answer 27

sample exception rate

Question 28

In nonstatistical audit sampling, planning the sample:

1) state the _______ of the audit test
2) decide whether audit _______ applies
3) define _____ and ______ conditions
4) Define the ______
5) Define the sampling unit

Answer 28

1) objectives
2) sampling
3) exceptions and attributes
4) population

Question 29

in nonstatistical audit sampling, planning the sample:

6) specify the _____________ exception rate
7) Specify the ________ risk of overreliance
8) ________ the population exception rate
9) Determine the ______ sample size

Answer 29

6) tolerable
7) acceptable
8) estimate
9) initial

Question 30

In nonstatistical audit sampling, selecting the sample and performing the tests:

10) select the _____
11) perform the audit _______

Answer 30

10) sample

11) procedures

Question 31

in nonstatistical audit sampling, evaluating the results:

12) generalize form the sample to the population
13) Analyze _______
14) decide the ______ of the population

Answer 31

exceptions

acceptability

Question 32

The statistical sampling method most commonly used for tests of controls and substantive test of transactions is ________ _______.

Answer 32

attributes sampling

Question 33

___________ __________ is based on the binomial distribution( a distribution of all possible samples where the items in the population each have on of two possible states)

Answer 33

attributes sampling