Wiley Test Bank - Audit Sampling

Question 1

In estimation sampling for attributes, which one of the following must be known in order to appraise the results of the auditor’s sample?

Answer 1

Sample size, because the sample size is needed in order to evaluate the results of the attribute sampling since it is used to calculate the deviation rate for the sample.

Question 2

The major reason that the difference and ratio estimation methods would be expected to produce audit efficiency is that the:

Answer 2

Variability of the populations of differences or ratios is less than that of the populations of book values or audited values.

Question 3

In performing tests of controls, the auditor will normally find that:

Answer 3

The rate of deviations in the sample exceeds the rate of error in the accounting records.

Question 4

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

Answer 4

Desired sampling risk increases.

Question 5

To determine the number of items to be selected in a sample for a particular substantive test of details, the auditor should consider:

Answer 5

• Tolerable misstatement
• Allowable risk of incorrect acceptance
• Characteristics of the population

Question 6

Under probability-proportional-to-size (PPS) sampling, also known as dollar unit sampling:

Answer 6

the auditor controls the risk of incorrect acceptance by specifying that risk level for the sampling plan.

Question 7

The size of a sample designed for dual-purpose testing should be:

Answer 7

the larger of the samples that would otherwise have been designed for the two separate purposes.

Question 8

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:

Answer 8

Do not have to be prenumbered in order for the auditor to use the technique.

Question 9

When there is a SMALL measure of tolerable misstatements and a HIGH expected error frequency:

Answer 9

the auditor would be more likely to conclude that all of the items in an account under consideration should be examined rather than tested on a sample basis.

Question 10

Tainting percentage:

Answer 10

[(Recorded amount - Audit amount)/Recorded amount]. Multiply result by sampling interval to determine the projected error.

Question 11

The objective of the allowance for sampling risk in sampling for tests of controls on internal control is to:

Answer 11

Estimate the range of procedural deviations in the population.
—because the objective is to estimate the confidence interval (range of procedural deviations) of the population.