Chapter 9 [Salosagcol]

Question 1

This involves the application of the procedures to less than 100% of the items within an account balance or class of transactions. This enables the auditor to obtain and evaluate audit evidence about some characteristics of the selected items in order to form an opinion about the characteristics of all the items supporting an account balance or transaction class.

a. Audit techniques
b. Audit sampling
c. Selective testing
d. Specific identification

Answer 1

b

Question 2

When designing audit procedures, the auditor should determine the appropriate means of selecting items for testing. The means available to the auditor would include:

a. 100% examination, Audit sampling, Selecting specific items
b. Audit sampling
c. Audit sampling, Selecting specific items
d. Selecting specific items

Answer 2

a

Question 3

Which of the following constitutes audit sampling?

a. Selecting and examining specific items to determine whether or not a particular procedure is being performed.
b. Examining items to obtain information about matters such as the client’s business, the nature of transactions, accounting and internal control systems.
c. Examining items whose values exceed a certain amount so as to verify a large proportion of the total amount of an account balance or class of transactions.
d. Applying audit procedures to less than 100% of items within an account balance or class of transactions such that all sampling units have a chance of selection.

Answer 3

d

Question 4

The auditor’s principal objective when using a sample of tests of details of balances is whether the

a) account balance being audited is fairly stated.
b) transactions being audited are free of misstatements.
c) controls being tested are operating effectively.
d) transactions and account balances being audited are fairly stated.

Answer 4

a

Question 5

Audit sampling for substantive tests is appropriate when

a. Analytical procedures are used
b. The auditor wants to eliminate sampling risks
c. A population contains small number of large value items
d. Tests of details are performed

Answer 5

d

Question 6

For which fo the following audit procedures is audit sampling inappropriate?

a. Review sales transactions for large and unusual amounts
b. Examine a sample of duplicate sales invoices for credit approval.
c. Compare the quantity on duplicate sales invoices with the quantity on related shipping documents.
d. Audit sampling is appropriate for each of the above procedures.

Answer 6

a

Question 7

Audit sampling for test of control is generally appropriate when

a. Control leaves evidence of performance
b. Control leaves no evidence of performance
c. 100% of the transactions is tested
d. Examining specific high value items in the population

Answer 7

a

Question 8

The possibility that the auditor’s conclusion based on a sample may be different from the conclusion reached if the entire population were subjected to the same procedure is called

a. Audit risk
b. Non-sampling risk
c. Sampling risk
d. Detection risk

Answer 8

c

Question 9

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

a. A randomly chosen sample may not be representative of the population as a whole on the characteristics of interest.
b. An auditor may select audit procedures that are not appropriate to achieve the specific objective.
c. An auditor may fail to recognize errors in the documents examined for the chosen sample.
d. The documents related to the chosen sample may not be available for inspection.

Answer 9

a

Question 10

One of the ways to reduce sampling risk is to

a. Increase the sample size
b. Carefully design the audit procedures to be used
c. Provide proper supervision and instruction of the audit team
d. Use variables sampling rather than attribute sampling

Answer 10

a

Question 11

Non-sampling errors can occur when audit tests do not uncover existing exceptions in the

a. Population
b. Planning stage
c. Sample
d. Financial statement

Answer 11

c

Question 12

One of the causes of non-sampling error is

a. Failure to draw a random sample
b. Failure to draw a representative sample
c. The use of inappropriate or ineffective audit procedures
d. The use of attributes sampling instead of variables sampling

Answer 12

c

Question 13

One of the ways to control non-sampling 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. Control which ensure that the sample drawn is random and representative

Answer 13

b

Question 14

Which of the following 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

Answer 14

b

Question 15

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. Any of the above

Answer 15

a

Question 16

Sampling risk may be controlled by

a. Increasing the sample size
b. Adequate supervision of audit personnel
c. Both A and B
d. Neither A nor B

Answer 16

c

Question 17

Which of the following statements is most 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.

Answer 17

d

Question 18

One of the ways to reduce sampling risk is to

a. Carefully design the audit procedures to be used
b. Use variables sampling rather than attributes sampling
c. Provide proper supervision and instruction of the audit team
d. Use an appropriate method of selecting sample items from the population

Answer 18

d

Question 19

In assessing sample risk, alpha risks relate to the

a. Efficiency of the audit
b. Selection of the sample
c. Effectiveness of the audit
d. Audit quality controls

Answer 19

a

Question 20

In performing substantive tests, the auditor is concerned with two risks or errors of sampling, the alpha error and the beta error.

a. The alpha error is of greater concern to the auditor than the beta error.
b. The beta error is of greater concern to the auditor than the alpha error
c. The beta error and the alpha error are of equal importance to the auditor
d. Neither the alpha error nor the beta error need be considered by the auditor

Answer 20

b

Question 21

To determine if a sample is truly representative of the population, an auditor would be required to

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

Answer 21

c

Question 22

While performing a substantive test of details during an audit, the auditor determined that the sample results supported the conclusion that the recorded account balance was materially misstated. Which of the following is the least likely auditor reaction to this discovery?

a. Perform expanded audit tests in the relevant areas.
b. Increase detection risk in the relevant areas
c. Increase the sample size for test of control
d. Take no action until tests of other audit areas are completed

Answer 22

a

Question 23

In assessing sample risk, beta risks relate to the

a. Efficiency of the audit
b. Selection of the sample
c. Effectiveness of the audit
d. Audit quality controls

Answer 23

c

Question 24

The acceptable risk of assessing control risk too low will normally be assessed at a ____ level when auditing a public company.

a. Higher
b. Compensating
c. Lower
d. Nominal

Answer 24

c

Question 25

What is the proper order of steps for the following activities?
1. Analyze exceptions
2. Select the sample
3. Design audit procedure
4. State the objectives of the audit test
5. Determine the appropriate sample size

a. 1,3,2,4,5
b. 4,3,1,2,5
c. 4,3,5,2,1
d. 1,2,3,4,5

Answer 25

c

Question 26

PSA 530 identifies two general approaches to audit sampling. They are

a. Random & nonrandom
b. Statistical & nonstatistical
c. Precision & reliability
d. Risk and nonrisk

Answer 26

b

Question 27

Which of the following sampling plans would be designed to estimate a numerical measurement of a population such as peso value?

a. Numerical sampling
b. Sampling of attributers
c. Discovery sampling
d. Sampling for variables

Answer 27

d

Question 28

Which of the following statements best expresses the impact that the performance of audit procedures has on statistical and nonstatistical sampling?

a. Audit procedures on the sample item will vary as a result of using either statistical or nonstatistical sampling
b. The audit procedures will be the same for either statistical or nonstatistical sampling but they must be performed differently for each
c. Statistical sampling requires quantitative audit procedures, whereas nonstatistical sampling requires judgmental audit procedures
d. Audit procedures on the sample item will not vary as a result of using either statistical or nonstatistical sampling

Answer 28

d

Question 29

Which of the following statements is true?

a. The audit procedures will vary as a result of using either statistical or nonstatistical sampling
b. The audit procedures will be the same for either statistical or nonstatistical sampling, but they must be performed differently for each.
c. Statistical sampling requires quantitative audit procedures, whereas nonstatistical sampling requires judgmental audit procedures
d. The same audit procedures are performed in the same manner for either statistical or nonstatistical sampling.

Answer 29

d

Question 30

A statistical method used to estimate the proportion of items in a population containing a characteristics of interest is

a. Attributes sampling
b. Variables sampling
c. Estimation sampling
d. Population - proportional-to-size sampling

Answer 30

a

Question 31

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 only be quantified when nonstatistical sample selection techniques are used to select the sample
c. Sampling risk can be quantified only when statistical sampling techniques are used to select the sample.
d. none of the above

Answer 31

c

Question 32

Which of the following sampling methods would be most appropriate in performing tests of controls over authorization of cash disbursements

a. Attributes
b. Variables
c. Ratio
d. Stratified

Answer 32

a

Question 33

There are many kinds of statistical estimates that an auditor may find useful, but basically every accounting estimate is either of a quantity or of an error rate. The statistical terms that roughly correspond to “quantities” and “error rate,” respectively, are:

a. Attributes and variables
b. Variables and attributes
c. Constants and attributes
d. Constants and variables

Answer 33

b

Question 34

Which of the following is not true for nonstatistical sampling?

a. Applies mathematical rules that allows auditors to quantify sampling risk.
b. May use statistical selection techniques.
c. Reaches conclusion about the population on a judgmental sample.
d. Does not allow measurement of sample reliability.

Answer 34

a

Question 35

When the auditor intends to evaluate a sample statistically, the only acceptable selection method is

a. Statistical selection
b. Judgmental selection
c. Haphazard selection
d. Block sample selection

Answer 35

a

Question 36

Which of the following is not a type of statistical method that provides results in peso terms?

a. Variables sampling
b. Attributes sampling
c. Monetary-unit sampling
d. Sampling with probability proportional to size

Answer 36

b

Question 37

Oscar CPA believes that the rate of client billing errors is 4% and has established a tolerable deviation rate of 6%. In auditing client invoices, Oscar should use

a. Stratified sampling
b. Classical sampling
c. Proportional sampling
d. Attributes sampling

Answer 37

d

Question 38

A principal advantage of statistical methods of attributes sampling over nonstatistical methods is that they provide a scientific basis for planning the

a. Risk assessing control risk to low
b. Tolerable exception rate
c. Expected population exception rate
d. Sample size

Answer 38

d

Question 39

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.

Answer 39

c

Question 40

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.

Answer 40

c

Question 41

Auditors are concerned with which type of exceptions in populations of accounting data when performing test of control?

a. Deviations from client established controls
b. Monetary misstatements in transaction data
c. Monetary misstatements in account balance details
d. Auditors are concerned with all of these exceptions

Answer 41

a

Question 42

An advantage of using statistical sampling is that such techniques

a. Mathematically measure risk
b. Eliminate the need for judgmental decision
c. Define the value of reliability necessary to provide audit assurance
d. Have been established in the courts to be superior to nonstatistical sampling

Answer 42

a

Question 43

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

a. Deviation rates
b. Percentages
c. Pesos
d. Expectation rates

Answer 43

c

Question 44

If an auditor, planning to use statistical sampling, is concerned with the number of a client’s sales invoices that contain mathematical errors, the auditor would most likely utilize which sampling technique?

a. Random sampling with replacement
b. Sampling for attributes
c. Sampling for variables
d. Stratified random sampling

Answer 44

b

Question 45

In a sampling application, the group of items about which the auditor wants to estimate some characteristic is called the

a. Population
b. Sample
c. Attribute of interest
d. Sampling unit

Answer 45

a

Question 46

Which of the following statements is most correct about the quantification sampling risk?

a. Sampling risk cannot be quantified
b. Sampling risk can be quantified only when non-statistical selection techniques are used to select the sample
c. Sampling risk can be quantified only when statistical selection techniques are used to select the sample
d. None of the above

Answer 46

c

Question 47

The sample deviation rate equals

a. The number of deviations in the population divided by the sample size
b. The number of items in the population multiplied by the number of deviations in the sample
c. The number of deviations in the sample divided by the sample size
d. The number of deviations in the population divided by the population size

Answer 47

c

Question 48

The deviation 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 deviation rate
b. Estimated population deviation rate
c. Acceptable sampling risk
d. Sample deviation rate

Answer 48

a

Question 49

Statistical samples do not allow

a. More efficient samples
b. Measurement of samples reliability
c. Replacement of the auditor’s professional judgment
d. Measurement of sample risk

Answer 49

c

Question 50

The maximum amount of error in a population that the auditor is willing to accept is referred to as the

a. Acceptable risk
b. Tolerable error
c. Expected error
d. Tolerable materiality

Answer 50

b

The events or transactions that should be considered in financial accounting or the matters of litigations, claims, and assessments are considered as the matters which come within the direct knowledge and control of the management.

Question 51

The deviation rate the auditor expects to find in the population, before testing begins, is called the

a. Tolerable deviation rate
b. Sample deviation rate
c. Computed upper deviation rate
d. Expected deviation rate

Answer 51

d

Question 52

Statistical sampling cannot

a. Determine reliability of samples
b. Select a sample to draw inference about a population
c. Assure a sample will be representative of a population
d. Measure the risk that a sample is not representative population

Answer 52

c

Question 53

Which of the following must be set prior to testing a sample?

a. Sample deviation rate
b. Achieved upper precision limit.
c. Computed upper deviation rate
d. Tolerable deviation rate

Answer 53

d

Question 54

The tolerable rate of deviations for tests of controls is generally:

a. Lower than the expected rate of deviation
b. Higher than the expected rate of deviation
c. Identical to the expected rate of deviation
d. Unrelated to the expected rate of deviation

Answer 54

b

Question 55

Which of the following factors is generally not considered in determining sample size for a test of controls?

a. Population size
b. Tolerable rate
c. Risk of assessing control risk too low
d. Expected population deviation rate

Answer 55

a

Question 56

A principal advantage of statistical methods of attributed sampling over nonstatistical methods is that they provide a scientific basis for establishing the:

a. Risk of assessing control risk too low
b. Tolerable deviation rate
c. Exepected population deviation rate
d. Sample size

Answer 56

d

Question 57

The risk which the auditor is willing to take accepting a control as being effective when it is not is the

a. Finite correction factor
b. Tolerable exception rate
c. Acceptable risk of assessing control risk too low
d. Estimated population exception rate

Answer 57

c

Question 58

If the auditor decides to assess control risk at the maximum level, tests of controls are

a. Increased in number
b. Reduced in number
c. Not performed
d. Unchanged from prior planned settings

Answer 58

c

Question 59

Auditors who prefer statistical over nonstatistical sampling believe that the principal advantage of statistical sampling flows from its unique ability to

a. Provide a mathematical measurement of uncertainty
b. Promote a more legally defensible procedural approach
c. Define the precision required to provide audit satisfaction
d. Have been established in the courts to be superior to judgmental sampling.

Answer 59

a

Question 60

The relationship between sample size and the allowable sampling risk is

a. Direct
b. Inverse
c. Variable
d. Indeterminate

Answer 60

b

Question 61

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

a. Is reduced
b. Is increased
c. Is not changed
d. May be reduced or increased depending upon other circumstances

Answer 61

a

Question 62

The tolerable rate of deviation for tests of controls necessary to justify a control risk assessment depends primarily on which of the following?

a. The cause of errors
b. The extent of reliance to be placed on the procedures
c. The amount of any substantive errors
d. The limit used in audits of similar clients

Answer 62

b

Question 63

A number of factors influence the sample size for a substantive test of details of an account balance. All other factors being equal, which of the following would lead to a larger sample size

a. Assessing control risk at a low level
b. Greater reliance on analytical procedures
c. Smaller expected frequency of misstatements
d. Smaller measure of tolerable misstatements

Answer 63

d

Question 64

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

a. Tolerable error
b. Acceptable risk of incorrect injection
c. Estimate of misstatements in the population
d. Acceptable risk of incorrect aceeptance

Answer 64

b

Question 65

How would increases in tolerable misstatement and assessed level of control risk affect the sample size in a substantive test of details?

a. Increase, Increase
b. Increase, Decrease
c. Decrease, Increase
d. Decrease, Decrease

Answer 65

c

Question 66

The tolerable rate of deviations for tests of controls is generally

a. Lower than the estimated population deviation rate in the related accounting records
b. Higher than the estimated population deviation rate in the related accounting records
c. Identical to the estimated population deviation rate in the related accounting records
d. Unrelated to the estimated population deviation rate in the related accounting records

Answer 66

b

Question 67

Which of the following combinations results in a decrease in sample size for attributes?

Adaptable sampling risk—Tolerable deviation rate—Expected population deviation rate

a. Increase, Decrease, Increase
b. Decrease, Increase, Decrease
c. Increase, Increase, Decrease
d. Increase, Increase, Increase

Answer 67

c

Question 68

Which of the following would have the least impact in determining sample size for tests of controls?

a. Expected population deviation rate
b Risk of assessing control risk too low
c. Tolerable deviation rate
d. Population size

Answer 68

d

Question 69

In determining the sample size for a test of controls, an auditor should consider the expected rate of deviations, the allowable sampling risk, and the

a. Tolerable deviation rate
b. Risk of incorrect acceptance
c. Nature and cause of deviations
d. Population size

Answer 69

a

Question 70

As the amount of misstatements expected in the population increases, the planned sample size will:

a. Decrease
b. Increase
c. Vary based on characteristics of the population
d. Be unaffected

Answer 70

b

Question 71

Which of the following statements is correct concerning statistical sampling in tests of controls?

a. The population size has little or no effect on determining sample size except for very small populations.
b. The expected population deviation rate has little or no effect on determining sample size except for very small populations.
c. As the population size doubles, the sample size also should double.
d. For a given tolerable rate, a larger sample size should be selected as the expected population deviation rate decreases.

Answer 71

a

Question 72

If acceptable audit risk is increase, acceptable risk of incorrect acceptance will

a. Increase
b. Decrease
c. Not be affected
d. Either increase or decrease

Answer 72

a

Question 73

To determine an optimum sample size when sampling methods are used in a substantive tests, all of the following factors must be considered except the

a. Variance in the population
b. risk levels the auditor is willing to accept
c. Deviation rate the auditor expects to find in the population
d. Tolerable misstatement

Answer 73

c

Question 74

Which of the following results in a larger sample size?

a. Decrease the desired confidence level and decrease the tolerable deviation rate
b. Increase in the desired confidence level and decrease the tolerable deviation rate
c. Decrease the desired confidence level and increase the tolerable deviation rate
d. increase the desired confidence level and increase the tolerable deviation rate

Answer 74

b

Question 75

The acceptable risk of assessing control risk too low has a significant effect on sample size. The relationship this acceptable risk and the sample size is

a. Variable
b. Direct
c. Inverse
d. Nonexistent

Answer 75

c

Question 76

The acceptable risk of assessing control risk too low is a measure of the level of risk that

a. The auditor is willing to take
b. Is predicted by the random number table
c. Is predicted by the statistical frequency table
d. Is generated as a result of the auditor’s knowledge of the tru population deviation rate

Answer 76

a

Question 77

In attributes sampling, an advance estimate of the estimated population deviation rate is necessary to plan the appropriate sample size. The relationship between the expected population deviation rate and the sample size is

a. Direct
b. Inverse
c. Dependent on other factors present
d. Indeterminate

Answer 77

a

Question 78

Statistical theory proves that in most types of populations to which attributes sampling applies, the population size is

a. Not a consideration in determining sample size
b. A minor consideration in determining sample size
c. A major consideration in determining sample size
d. The determining factor in establishing sample size

Answer 78

b

Question 79

When using statistical sampling, the auditor would probably require a smaller if the

a. Population increases
b. Desired reliability decreases
c. Desired precision interval narrows
d. Expected exception rate increases

Answer 79

b

Question 80

Principal methods of sampling selection include all of the following except

a. Haphazard
b. Random number
c. Systematic
d. Statistical

Answer 80

d

Question 81

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

Answer 81

a

Question 82

Correspondence is established between the random number table and the population by

a. Identifying each item in the population with a unique number
b. Deciding the number of digits to use in the random number table and their association with the population numbering system
c. Defining which digits the auditor uses in a column and the method of reading the table
d. Selecting a random starting point on the table

Answer 82

b

Question 83

When auditors wish to evaluate a sample statistically, an acceptable selection method is:

a. Systematic sample selection
b. Judgmental selection
c. Haphazard selection
d. Block sample selecton

Answer 83

a

Question 84

Which of the following statements regarding block sampling is least likely to be true?

a. Block sampling is the section of several items in sequence.
b. It is acceptable to use block sampling for tests of transactions only if a reasonable number of blocks is used
c. Only one block should be selected to increase the probability of a representative sample
d. Once the first item in the block is selected, the remainder of the block is chosen automatically.

Answer 84

b

Question 85

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. Systematic selection
c. Random selection
d. Computerized selection

Answer 85

b

Question 86

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 deviation rate
c. Computed upper deviations rate
d. Mean

Answer 86

a

Question 87

The advantage of systematic sample selection is the

a. It is easy to use
b. There is limited possibility of it being biased
c. It is unnecessary to determine if the population is arranged randomly.
d. It automatically selects items material to the financial statements.

Answer 87

a

Question 88

A mean of reducing the potential bias in systematic sample selection is to

a. Use multiple starts
b. Use a random number table
c. Include a large block of the population
d. Include only the high-dollar value items

Answer 88

a

Question 89

When the auditor goes through a population and selects items for the sample without regard to their size, source, or other distinguishing characteristics, is called

a. Block sample selection
b. Haphazard selection
c. Systematic sample selection
d. Statistical selection

Answer 89

b

Question 90

In examining cash disbursements, an auditor plans to choose a sample using systematic selection with a random start. The primary advantage of such a systematic selection is that population items

a. That include irregularities will not be overlooked when the auditor exercises compatible reciprocal options
b. May occur in a systematic pattern, thus making the sample more representative
c. May occur more than once in a sample
d. Do not have to be prenumbered in order for the auditor to use the technique

Answer 90

d

Question 91

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

Answer 91

b

Question 92

A method of sampling in which all the items in the population are divided into two or more sub-population is

a. Variable sampling
b. Stratified sampling
c. Attribute sampling
d. Divisible sampling

Answer 92

b

Question 93

In statistical sampling methods used in substantive testing, an auditor most likely would stratify a population into meaningful groups if

a. Value-weighted sampling is used
b. The population has highly variable recorded amounts
c. The auditor’s estimated tolerable misstatement is extremely small
d. The standard deviation of recorded amounts is relatively small

Answer 93

b

Question 94

What is the primary objective of using stratification as a sampling method in auditing?

a. To increase the confidence level at which a decision will be reached from the results of the sample selected.
b. To determine the occurrence rate for a given characteristic in the population being studied.
c. To decrease the effect of variance in the total population
d. To determine the precision range of the sample selcted

Answer 94

c

Question 95

Which of the following can be used when using random number selection?

a. Use of random number tables
b. Use computer generated random numbers
c. Either A or B
d. Neither A nor B

Answer 95

c

Question 96

Which of the following statistical selection techniques is least desirable for use by an auditor?

a. Systematic selection
b. Block selection
c. Stratified selection
d. Sequential selection

Answer 96

b

Question 97

In performing a review of his client’s cash disbursements, a CPA uses systematic sample selection with a random start. The primary disadvantage of systematic sample selection is that population items

a. May occur twice in the sample
b. Must be recorded in a systematic pattern before the sample can be drawn
c. may occur in a systematic pattern, thus negating the randomness of the sample
d. Must be replaced in the population after sampling to permit value statistical inference

Answer 97

c

Question 98

An auditor is testing internal control procedures that are evidenced on an entity’s vouchers by matching random numbers with voucher numbers. If a random number matches the number of a voided voucher, that voucher ordinarily should be replaced by another voucher in the random sample if the voucher

a. Constitutes a deviation
b. Cannot be located
c. Has been properly voided
d. Represents an immaterial peso amount

Answer 98

c

Question 99

An auditor plans to examine a sample of 20 purchase orders for proper approvals as prescribed by the client’s control procedures. One of the purchase orders in chosen sample of 20 cannot be found, and the auditor is unable to use alternative procedures to test whether that purchase order was properly approved. The auditor should

a. Choose another purchase order to replace the missing purchase order in the sample
b. Consider this test of control invalid and proceed with substantive tests since internal control cannot be relied upon
c. Treat the missing purchase order as a deviation for the purpose of evaluating the sample
d. Select a completely new set of 20 purchase orders

Answer 99

c

Question 100

What is an auditor’s evaluation of a statistical sample for attributes when a test of 100 documents results in 4 deviations if tolerable rate is 5%, the expected population deviation rate is 3%, and the allowance for sampling risk is 2%?

a. Accept the sample results as support for planned reliance on the control because the tolerable rate less the allowance for sampling risk equals the expected population deviation rate
b. Modify planned reliance on the control because the sample deviation plus the allowance for sampling risk exceeds the tolerable rate
c. Modify planned reliance on the control because the tolerable rate plus the allowance for sampling risk exceeds the expected population deviation rate
d. Accept the sample results as support for planned reliance on the control because the sample deviation rate plus the allowance for sampling risk exceeds the tolerable rate

Answer 100

b

Question 101

If the auditor is concerned that a population may contain exceptions, the determination of a sample size sufficient to include at least one such exception is a characteristics of

a. Discovery sampling
b. Random sampling
c. Variables sampling
d. Peso-unit sampling

Answer 101

a

Question 102

Which of the following statistical sampling plan does not use a fixed sample size for tests of control?

a. PPS sampling
b. Value-weighted sampling
c. Sequential sampling
d. Variables sampling

Answer 102

c

Question 103

You are testing controls over accounts receivable and are determining if the appropriate credit authorization was made by an authorized person. Your sample size is 40 and your computed upper deviation rate is 5%. On the first 10 items sampled you have found 8 deviations. You would most likely:

a. Continue with the other 30 items
b. Revisit the sample size calculations
c. Increase the tolerable deviation rate
d. Stop the test and re-set control risk for accounts recevable

Answer 103

d

Question 104

In using audit sampling in performing set of control, the auditor is primarily interested in determining the

a. Computed lower deviation rate
b. Computed upper deviation rate
c. Computed average deviation rate
d. None of the above

Answer 104

b

Question 105

In which sampling method is the probability of selection of an item proportional to the size or the value of the item (e.g., a P1,000 item is 10 times more likely to be selected than a P100 item)?

a. Discovery sampling
b. Value-weighted sampling
c. Ratio estimation
d. Stratified sampling

Answer 105

b

Question 106

Using statistical sampling to assist in verifying the year-end accounts payable balance, an auditor has accumulated the following data:
Refer to page 427, problem 106

Using the ratio estimation technique, the auditor’s estimate of year-end accounts payable balance would be

a. P6,150,000
b. P5,125,000
c. P6,000,000
d. P5,050,000

Answer 106

c

Question 107

An auditor uses monetary unit sampling with a sampling interval of P20,000 and detects an item with a recorded amount of P10,000 with an audited value of P4,000. The projected misstatement of the sample is

a. P12,000
b. P6,000
c. P10,000
d. P3,000

Answer 107

a

Question 108

Value weighted sampling is most appropriate when the auditor

a. Anticipates understatement errors
b. Expects no errors
c. Anticipates overstatement errors
d. Has assessed control risk at high level

Answer 108

c

Question 109

The use of the ratio estimation sampling technique is most effective when

a. The calculated audit amounts are approximately proportional to the client’s book amounts
b. A relatively small number of differences exist in the population
c. Estimating populations whose records consist of quantities, but not book values
d. Large overstatement differences and large understatement differences exist in the population

Answer 109

a

Question 110

In comparison with classical variables sampling, which of the following is an advantage of value weighted sampling?

a. Value weighted sampling automatically results in a stratified sample
b. Value weighted sampling results in a smaller sample size if many differences are expected between audited and recorded amounts
c. Value weighted sampling is particularly appropriate when understatement errors are expected
d. Value weighted sampling is less likely to overstate the allowance for sampling risk when errors are found in the sample

Answer 110

a

Question 111

Value weighted sampling is not particularly effective at detecting

a. Overstatements
b. Understatements
c. Errors in current assets
d. Errors in noncurrent assets

Answer 111

b

Question 112

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

a. Population
b. Population which the auditor has included in the sample
c. Population which contain errors
d. Sample which contain errors

Answer 112

a

Question 113

When errors are found in a sample, auditors in practice generally make the assumption

a. That the errors found in the sample are only an isolated event
b. That the sample errors are the same as the population errors
c. That the population errors are smaller than the sample errors
d. That the actual sample errors are representative of the population errors

Answer 113

d

Question 114

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

a. Accept the population as fairly stated or to require further action
b. Determine sampling error and calculate the estimated total population error
c. Project the point estimate
d. Determine the error in each sample

Answer 114

a

Question 115

The error assumption to make regarding the overall percent of error in those population items containing error is

a. Determined using random number tables
b. Set after a quantitative analysis of client’s internal control system
c. Based on the auditor’s personal judgement in the circumstances
d. Based on statistical analysis using confidence limits

Answer 115

c

Question 116

When the computed upper deviation rate is greater than the tolerable deviation rate, it is necessary for the auditor to take specific action. Which of the following courses of action would be inappropriate?

a. Revise and relax the tolerable deviation rate
b. Expand the sample size
c. Revise the assessed control risk
d. Modify the planned substantive tests

Answer 116

a

Question 117

Which of the following statements is correct with respect to the evaluation of sample units?

a. It is acceptable to make nonstatistical evaluations only when probabilistic sample selection is used
b. It is acceptable to make nonstatistical evaluations only if the auditor cannot quantify sampling risk
c. It is never acceptable to evaluate a nonprobabilistic sample as if it were a statistical one
d. All of the above

Answer 117

c

Question 118

Which of the following statement is a valid criticism of the use of non-statistical sampling methods?

a. Many audit tests, such as footing of journals, must be performed outside a statistical sampling context
b. The cos 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

Answer 118

d

Question 119

The highest estimated deviation rate in the population at a given acceptable risk of assessing control risk too low is

a. The sample deviation rate
b. Estimated population deviation rate
c. The computed upper deviation rate
d. The tolerable exception rate

Answer 119

c

Question 120

If an auditor, without statistical sampling, selects a sample of one hundred items from a population and finds two exceptions, the auditor

a. Can conclude that the sample exception rate is 2%
b. Can conclude that the population deviation rate is 2%
c. Can calculate the highest deviation rate expected in the population
d. Cannot make any conclusions about either sample or the population

Answer 120

a

Question 121

Before the population can be considered acceptable based on the acceptable risk of assessing control risk too low, the computed upper deviation rate must be

a. Greater than or equal to the tolerable deviation rate
b. Greater than the tolerable deviation rate
c. Less than or equal to the tolerable deviation rate
d. Less than the tolerable deviation rate

Answer 121

c

Question 122

An error that arises from an isolated event that has not recurred other than on specifically identifiable occasions and is therefore not representative or errors in the population

a. Tolerable error
b. Non-sampling error
c. Sampling error
d. Anomalous error

Answer 122

d