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BSA 31P > Chapter 9 Exam > Flashcards

Chapter 9 Exam Flashcards

1
Q

The risk the auditor is willing to take of accepting a balance as correct when the true misstatement in the balance under audit is greater than the tolerable misstatement is the acceptable risk of incorrect acceptance.

T or F?

A

TRUE

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2
Q

An auditor using nonstatistical sampling cannot formally measure sampling error and therefore must subjectively consider the possibility that the true population misstatement exceeds a tolerable amount. The peso difference between the point estimate and tolerable misstatement should be considered by the auditor in making this assessment.

T or F?

A

TRUE

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3
Q

Tolerable misstatement is used to select the sample.

T or F?

A

FALSE

Tolerable misstatement is used to evaluate results

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4
Q

An auditor using nonstatistical sampling cannot formally measure sampling error.

T or F?

A

TRUE

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5
Q

In evaluating results for tests of details, auditors must evaluate exceptions identified.

T or F?

A

FALSE

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6
Q

Difference estimation frequently results in smaller sample sizes than any other variables sampling method.

T or F?

A

TRUE

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7
Q

Sampling used for tests of details provides results in terms of:

a. percentages.
b. exception rates.
c. expectation rates.
d. pesos.

A

D

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8
Q

The purpose of applying stratified sampling to a population is to emphasize certain items and deemphasize others.

T or F?

A

TRUE

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9
Q

When using systematic selection procedures with monetary-unit sampling of accounts receivable, the interval is determined by dividing the population size by the desired sample size.

T or F?

A

TRUE

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10
Q

When auditors sample for tests of details of balances, the objective is to determine whether the account balance being audited is fairly stated.

T or F?

A

TRUE

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11
Q

In difference estimation sampling, the confidence limits are calculated by combining the point estimate of the total misstatements and the computed precision interval at the desired confidence level.

T or F?

A

TRUE

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12
Q

The population standard deviation of the misstatements from the sample is inversely related to the computed precision interval in difference estimation; that is, as the standard deviation increases, the computed precision interval decreases.

T or F?

A

FALSE

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13
Q

The primary factor affecting the auditor’s decision about ARIA is assessed inherent risk.

T or F?

A

FALSE

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14
Q

As the amount of misstatements expected in the population approaches tolerable misstatement, the planned sample size will decrease.

T or F?

A

FALSE

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15
Q

The two primary types of sampling methods used for calculating dollar misstatements are attributable sampling and monetary unit sampling.

T or F?

A

FALSE

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16
Q

The acceptable risk of incorrect acceptance is most related to audit efficiency.

T or F?

A

FALSE

The acceptable risk of incorrect acceptance (beta risk) is most related to audit effectiveness.

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17
Q

As the amount of misstatements expected in the population approaches tolerable misstatement, the planned sample size will vary based on characteristics of the population.

T or F?

A

FALSE

As the amount of misstatements expected in the population approaches tolerable misstatement, the planned sample size will increase.

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18
Q

Tolerable misstatements for overstatements and understatements must be different amounts.

T or F?

A

FALSE

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19
Q

Tolerable misstatement is used to determine sample size.

T or F?

A

FALSE

Tolerable misstatement is used to evaluate results

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20
Q

Estimated misstatement in the population and sample size are inversely related; that is, as estimated misstatement increases, sample size decreases.

T or F?

A

FALSE

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21
Q

In monetary-unit sampling, the relationship between tolerable misstatement size and required sample size is varied.

T or F?

A

FALSE

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22
Q

The final step in the evaluation of the audit results is the decision to project the point estimate

T or F?

A

FALSE

Steps in Evaluating the Results:
1. Project the misstatements of the population
2. Compare the projected misstatements with the tolerable misstatements and draw an overall conclusion

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23
Q

The primary factor affecting the auditor’s acceptable risk of incorrect acceptance is assessed inherent risk.

T or F?

A

FALSE

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24
Q

Both sampling and nonsampling risks are associated with substantive tests of transactions.

T or F?

A

TRUE

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25
Q

When using systematic selection procedures with monetary-unit sampling of accounts receivable, the interval is determined by consulting a random number table.

T or F?

A

FALSE

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26
Q

The auditor must consider the possibility that the true population misstatement is greater than the amount of misstatement that is tolerable when the auditor is performing monetary-unit sampling.

T or F?

A

TRUE

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27
Q

In monetary-unit sampling, the relationship between tolerable misstatement size and required sample size is inverse.

T or F?

A

TRUE

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28
Q

When using nonstatistical sampling, the larger the sample size, the greater the auditor’s confidence that the point estimate is close to the true population value.

T or F?

A

TRUE

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29
Q

The relationship between required sample size and the acceptable risk of incorrect acceptance is:

a. proportional.
b. inverse.
c. direct.
d. indeterminate.

A

B

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30
Q

Acceptable risk of incorrect acceptance is indirectly affected by acceptable audit risk.

T or F?

A

FALSE

Acceptable risk of incorrect acceptance is directly affected by acceptable audit risk.

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31
Q

In monetary-unit sampling, the relationship between tolerable misstatement size and required sample size is direct.

T or F?

A

FALSE

32
Q

Accounts with zero or negative year-end balances have no chance of being included in a standard probability proportional to size (PPS) sample.

T or F?

A

TRUE

33
Q

The final step in the evaluation of the audit results is the decision to accept the population as fairly stated or to require further action.

T or F?

A

TRUE

34
Q

As the acceptable risk of incorrect acceptance is reduced, the required sample size is unaffected.

T or F?

A

FALSE

35
Q

Which of the following does not have to be considered in determining the initial sample size of a test of details?

a. acceptable audit risk
b. acceptable risk of incorrect rejection
c. estimate of misstatements in the population
d. tolerable misstatement

A

B

36
Q

The auditor must consider the possibility that the true population misstatement is greater than the amount of misstatement that is tolerable when the auditor is performing nonstatistical sampling.

T or F?

A

FALSE

37
Q

As the acceptable risk of incorrect acceptance is reduced, the required sample size decreases.

T or F?

A

FALSE

38
Q

Tolerable misstatements for overstatements and understatements must be set at the same amount.

T or F?

A

FALSE

39
Q

Acceptable risk of incorrect rejection is the statistical risk that the auditor has concluded that a population is materially misstated when it is not.

T or F?

A

TRUE

40
Q

If an auditor desires a greater level of assurance in auditing a balance, the acceptable risk of incorrect acceptance is reduced.

T or F?

A

TRUE

41
Q

If an auditor concludes that internal controls are likely to be effective, the preliminary assessment of control risk can be reduced, leading to an increase in the acceptable risk of incorrect acceptance.

T or F?

A

TRUE

42
Q

When auditors apply MUS to a sample, the sample is selected using random sampling techniques.

T or F?

A

FALSE

43
Q

As the acceptable risk of incorrect acceptance is reduced, the required sample size increases.

T or F?

A

TRUE

44
Q

When using monetary-unit sampling, the recorded peso population is a definition of all the items in the population which the auditor has included in the sample.

T or F?

A

FALSE

When using monetary-unit sampling, the recorded peso population is a definition of all the items in the population.

45
Q

The most commonly used method of statistical sampling for tests of details of balances is:

a. monetary-unit sampling.
b. systematic sampling.
c. attributes sampling.
d. discovery sampling.

A

A

46
Q

When using monetary-unit sampling, the recorded peso population is a definition of all the items in the population.

T or F?

A

TRUE

47
Q

Tolerable misstatement is used to evaluate results.

T or F?

A

TRUE

48
Q

The acceptable risk of incorrect acceptance is most related to audit results.

T or F?

A

FALSE

The acceptable risk of incorrect acceptance is most related to audit effectiveness.

49
Q

The purpose of applying stratified sampling to a population is to avoid items that may contain misstatements.

T or F?

A

FALSE

50
Q

In monetary-unit sampling, the relationship between tolerable misstatement size and required sample size is indeterminable.

T or F?

A

FALSE

51
Q

Required sample size increases as the auditor’s tolerable misstatement for an account balance or class of transactions decreases.

T or F?

A

TRUE

52
Q

Tolerable misstatement is inversely related to sample size.

T or F?

A

TRUE

53
Q

Attributes sampling is not a type of statistical method that provides results in peso terms.

T or F?

A

TRUE

54
Q

Monetary-unit sampling is not particularly effective at detecting:

a. errors in noncurrent assets.
b. understatements.
c. overstatements.
d. errors in current assets.

A

B

55
Q

Which of the following is the auditor least likely to consider when estimating misstatements in the population?

a. Acceptable audit risk.
b. Prior experience with the client.
c. Results of current year tests of controls.
d. Results of analytical procedures already performed.

A

A

56
Q

In monetary-unit sampling, the likelihood of high dollar items from the population being included in the sample is lower than the likelihood for small dollar items.

T or F?

A

FALSE

57
Q

Tolerable misstatements for overstatements and understatements may be different amounts.

T or F?

A

TRUE

58
Q

Acceptable risk of incorrect acceptance (ARIA) and sample size are inversely related; that is, as ARIA increases, sample size decreases.

T or F?

A

TRUE

59
Q

The purpose of stratified sampling is to achieve a greater confidence level (lower risk of incorrect acceptance) for a given sample size.

T or F?

A

FALSE

The purpose of stratified sampling is to emphasize certain items and deemphasize others.

60
Q

Tolerable misstatements for overstatements and understatements must be expressed in percentages.

T or F?

A

FALSE

61
Q

When using systematic selection procedures with monetary-unit sampling of accounts receivable, the interval is determined by dividing the sample size by the account with the largest peso value.

T or F?

A

FALSE

Dividing the population size by the desired sample size.

62
Q

The sample size is inversely related to the computed precision interval in difference estimation; that is, as sample size increases, the computed precision interval decreases.

T or F?

A

TRUE

63
Q

Monetary-unit sampling is most commonly used when:

a. the auditor is searching for understatements only.
b. the population data are maintained on manual files.
c. a peso result is desired.
d. several exceptions are expected.

A

A

MUS methods (Value weighted selection) are especially applicable when making selections for accounts receivable confirmations, loan receivable confirmations, inventory price tests, and fixed asset addition tests.

64
Q

As the amount of misstatements expected in the population approaches tolerable misstatement, the planned sample size will be unaffected.

T or F?

A

FALSE

65
Q

If an auditor desires a greater level of assurance in auditing a balance, the acceptable risk of incorrect acceptance may be reduced or increased depending upon other circumstances.

T or F?

A

FALSE

66
Q

When auditors sample for tests of details of balances, the objective is to determine whether the transactions and account balances being audited are fairly stated.

T or F?

A

FALSE

67
Q

The acceptable risk of incorrect acceptance is most related to audit effectiveness.

T or F?

A

TRUE

68
Q

The use of monetary-unit sampling is most appropriate when the auditor expects to find many errors and when a monetary result is desired.

T or F?

A

FALSE

69
Q

When auditors sample for tests of details of balances, the objective is to determine whether the controls being tested are operating effectively

T or F?

A

FALSE

When auditors sample for tests of details of balances, the objective is to determine whether the account balance being audited is fairly stated.

70
Q

When auditors sample for tests of details of balances, the objective is to determine whether the transactions being audited are free of misstatements.

T or F?

A

FALSE

71
Q

The final step in the evaluation of the audit results is the decision to determine sampling error and calculate the estimated total population error.

T or F?

A

FALSE

The final step in the evaluation of the audit results is the decision to accept the population as fairly stated or to require further action.

72
Q

The final step in the evaluation of the audit results is the decision to determine sampling error and calculate the estimated total population error.

T or F?

A

FALSE

73
Q

Which of the following is not a likely item on which to apply stratification techniques?

a. peso value of accounts receivable
b. customer names of account receivables
c. aging of accounts receivable
d. number of sales per customer in a period

A

B

74
Q

Acceptable risk of incorrect rejection is a term relevant to sampling for tests of details.

T or F?

A

TRUE

75
Q

In estimating the population misstatement, the first step in projecting from the sample to the population is to:

a. make a point estimate.
b. calculate the precision interval.
c. revise the upper error bound.
d. determine the population mean.

A

A

A point estimate is a single value estimate of a parameter. For instance, a sample mean is a point estimate of a population mean.

BSA 31P (26 decks)

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