chapter 8 connect

Question 1

Auditing standards permit both statistical and nonstatistical methods of audit sampling.

True or False

Answer 1

True

Question 2

A Type I error is the risk of incorrect acceptance.

True or False

Answer 2

False

Question 3

Confidence level is the complement of sampling risk.

true or false

Answer 3

true

Question 4

A Type II error is the risk of incorrect acceptance.

true or false

Answer 4

true

Question 5

Confidence level and sampling risk are related to sample size.

true or false

Answer 5

true

Question 6

The larger the sample, the lower the confidence level and the lower the sampling risk.

true of false

Answer 6

false

Question 7

Audit sampling is commonly used to gather confirmation audit evidence.

true or false

Answer 7

true

Question 8

Audit sampling is commonly used to gather scanning audit evidence.

true or false

Answer 8

false

Question 9

Attribute sampling is used to estimate the proportion of a population that possesses a specified characteristic.

true or false

Answer 9

true

Question 10

Which of the following BEST illustrates the concept of sampling risk?

Multiple Choice
A randomly chosen sample may not be representative of the population as a whole (regarding the characteristic being tested).
An auditor may select audit procedures that are not appropriate to achieve the specific objective.
An auditor may fail to recognize errors in the documents examined for the chosen sample.
The documents related to the chosen sample may not be available for inspection.

Answer 10

A randomly chosen sample may not be representative of the population as a whole (regarding the characteristic being tested).

Question 11

With a nonstatistical sampling application, the auditor relies on professional judgment rather than the laws of probability to reach a conclusion about the audit test.

true or false

Answer 11

true

Question 12

Jones, CPA, believes the industry-wide deviation rate of client billing errors is 3% and has established a tolerable deviation rate of 5%. In the review of client invoices, Jones should use

Multiple Choice
discovery sampling.
attributes sampling.
stratified sampling.
variables sampling.

Answer 12

attributes sampling

Question 13

The tolerable deviation rate for a test of controls is generally:

Multiple Choice
lower than the expected rate of deviations in the related accounting records.
higher than the expected rate of deviations in the related accounting records.
identical to the expected rate of deviations in the related accounting records.
unrelated to the expected rate of deviations in the related accounting records.

Answer 13

higher than the expected rate of deviations in the related accounting records.

Question 14

The likelihood of assessing control risk too high is the risk that the sample selected to test controls:

Multiple Choice
does not support the auditor’s planned assessed level of control risk when the true operating effectiveness of internal control justifies such an assessment.Correct
contains misstatements that could be material to the financial statements when aggregated with misstatements in other account balances or transactions classes.Incorrect
contains proportionately fewer deviations from prescribed internal controls than exist in the balance or class as a whole.
does not support the tolerable misstatement for some or all of management’s assertions