M8-Sampling: Part 1 Flashcards
The sample size in an attribute sampling application is affected by the allowable risk of assessing control risk too low, the tolerable deviation rate, and the expected deviation rate. (true or false)
true
Both the risk of incorrect acceptance and the risk of assessing control risk too low relate to the effectiveness of an audit in detecting an existing material misstatement. (true or false)
true
Erroneously concluding that an account balance is materially misstated is an example of incorrect rejection. (true or false)
true
Attribute sampling is used to test controls. Inspecting employee time cards for proper approval by supervisors is a test of controls. Controls often relate to authorization, validity, completeness, accuracy, appropriate classification, accounting in conformity with GAAP, and proper period. Look for these terms in identifying which option is a test of controls. Words such as account balance, amount, valuation, presentation, and disclosure are more likely to relate to substantive tests. (true or false)
true
Statistical sampling helps the auditor to measure the sufficiency of the audit evidence because the auditor can quantify the audit risk, thus assisting in limiting it to an acceptable level. (true or false)
true
Deviations from control activities do not necessarily result in misstatements. Therefore, deviations from pertinent control activities at a given rate would ordinarily be expected to result in misstatements at a lower rate. (true or false)
true
The risk of assessing control risk too high is the risk that the assessed level of control risk based on the sample is created than the true risk based on the actual operating effectiveness of the control. (true or false)
true
The sample size for a test of controls varies directly with the expected deviation rate and inversely with the tolerable rate. If the auditor expects more errors, he or she would increase sample size; conversely, if the tolerable rate of deviation increases, not as many items need to be selected. (true or false)
true
The allowance for sampling risk is the excess of the upper deviation rate over the sample deviation rate. (true or false)
true
Variables sampling is used to determine whether a given account balance is reasonable. (true or false)
true
If the actual deviation rate in the population exceeds the maximum deviation rate based on the sample, control risk will be understated, because the control will be less effective than sample results would indicate. (true or false)
true
Attribute sampling is used to estimate a rate of occurrence, and often involves a yes-no question. Attribute sampling could be used to determine the error rate in posting journal entries, perhaps by asking, “Is the entry posted to the proper account?” (true or false)
true
A principal advantage of statistical methods of attribute sampling over non statistical methods is that they provide a scientific basis for planning the sample size. (true or false)
true
Sampling risk arises from the possibility that, when a substantive test is restricted to a sample, conclusions might be different than if the auditor had tested each item in the population. (true or false)
true
Non sampling risk includes all aspects of audit risk that are not due to sampling. It is always present and cannot be measured; the auditor can only attempt to reduce this risk to a very low level through adequate planning and supervision of the audit and quality control of all firm practices. Non sampling risk can arise because an auditor failed to recognize misstatements in documents examined. (true or false)
true
Examples of non sampling risk include the auditor selecting inappropriate auditing procedures, using inappropriate audit evidence, and failure by the auditor to recognize misstatements in documents examined.
