Test 2 - Ch.9

Question 1

Expected misstatement is directly related to sample size (T/F)

Answer 1

True

Question 2

When a auditor determines based on the sample results that there was a material misstatements when in fact there was not is an is the risk of what?

Answer 2

Incorrect Rejection (Type 1 error)

Question 3

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

Answer 3

Smaller measure of tolerable misstatement

Question 4

Misstatement rates must be small and the misstatements must be overstatements are inherent limitations of what?

Answer 4

Monetary-Unit Sampling

Question 5

What course of action would an auditor most likely follow in planning a sample of cash disbursements if the auditor is aware of several unusually large cash disbursements?

Answer 5

Identify the large and unusual disbursements as individually significant and test 100%

Question 6

In monetary-unit sampling, population size is…

Answer 6

The dollar balance in the account

Question 7

Classical variables sampling should be used if…

Answer 7

many items in the account are expected to have errors

Question 8

What is the primary objective of testing all individually significant items rather than sample testing?

Answer 8

To accept no sampling risk for items greater than tolerable misstatements

Question 9

In a monetary-unit sampling plan, the upper misstatement limit is $11,200 and the risk of incorrect acceptance is 5%. This means that…

Answer 9

There is a 95% chance that the actual misstatement in the account is $11,200 or less

Question 10

Which sampling method would be used to estimate a numeric measurement of a population, such as a dollar value?

Answer 10

Variable Sampling

Question 11

A number of factors influence the sample size of substantive test of details of an account balance. All factors being equal, what would lead to a large sample?

Answer 11

Smaller amount of Tolerable Misstatement

Question 12

What factors influence sample size for substantive test of details for a specific account

Answer 12

1. Sample Population ($ amount of account)
2. Tolerable Misstatement
3. Expected Misstatement
4. Confidence Factor

Question 13

Sampling population book value excludes what?

Answer 13

Items to be individually audited

Question 14

The risk of incorrect acceptance relates to what?

Answer 14

Effectiveness of the audit

Question 15

How does the auditor control the risk of incorrect acceptance in monetary-unit sampling?

Answer 15

By specifying the desired confidence level

Question 16

An increase in Tolerable Misstatement would have what affect on sample size?

Answer 16

Decrease the sample size

Question 17

An increase in assessed level of control risk would have what affect on sample size?

Answer 17

Increase sample size

Question 18

An auditor is performing substantive procedures of inventory balances consisting of a large number of items. Past experience indicates there may be numerous misstatements. Which sampling approach is best?

Answer 18

Classical Variable Sampling

Question 19

An auditor needs to estimate the dollar amount of the standard deviation of a population in order to use classical variable sampling (T/F)

Answer 19

True

Question 20

In classical variable sampling, what must be known in order to estimate the sample size?

Answer 20

The acceptable level of risk

Question 21

Inclusion of zero or negative balances is best for what type of sampling method?

Answer 21

Classical Variable