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AUD - CPA Exam - Audit Sampling
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The auditor faces a risk that the examination will not detect material misstatements which occur in the accounting process. In regard to minimizing this risk, the auditor primarily relies on
A) Substantive tests.
B) Tests of controls.
C) Internal control.
D) Statistical analysis.
A) Substantive tests.
If the size of the sample to be used in a particular test of attributes has not been determined by utilizing statistical concepts, but the sample has been chosen in accordance with random selection procedures
A) No inferences can be drawn from the sample.
B) The auditor has committed a nonsampling error.
C) The auditor may or may not achieve the desired risk of assessing control risk too low.
D) The auditor will have to evaluate the results by reference to the principles of discovery sampling.
C) The auditor may or may not achieve the desired risk of assessing control risk too low.
In attribute sampling, a 25% change in which of the following factors will have the smallest effect on the size of the sample?
A) Tolerable rate of deviation.
B) Number of items in the population.
C) Degree of assurance desired.
D) Planned assessed level of control risk.
B) Number of items in the population.
When using a statistical sampling plan, the auditor would probably require a smaller sample if the
A) Population increases.
B) Desired sampling risk decreases.
C) Desired sampling risk increases.
D) Expected error occurrence rate increases.
C) Desired sampling risk increases.
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
A) Random sampling with replacement.
B) Sampling for attributes.
C) Sampling for variables.
D) Stratified random sampling.
B) Sampling for attributes.
An auditor examining inventory may appropriately apply sampling for attributes in order to estimate the
A) Average price of inventory items.
B) Percentage of slow-moving inventory items.
C) Dollar value of inventory.
D) Physical quantity of inventory items.
B) Percentage of slow-moving inventory items.
Auditors often utilize sampling methods when performing tests of controls. Which of the following sampling methods is most useful when testing controls?
A) Attribute sampling.
B) Variable sampling.
C) Unrestricted random sampling with replacement.
D) Stratified random sampling.
A) Attribute sampling.
When using classical variables sampling for estimation, an auditor normally evaluates the sampling results by calculating the possible error in either direction. This statistical concept is known as
A) Precision.
B) Reliability.
C) Projected error.
D) Standard deviation.
A) Precision.
As a result of sampling procedures applied as tests of controls, an auditor incorrectly assesses control risk lower than appropriate. The most likely explanation for this situation is that
A) The deviation rates of both the auditor's sample and the population exceed the tolerable rate.
B) The deviation rates of both the auditor's sample and the population is less than the tolerable rate.
C) The deviation rate in the auditor's sample is less than the tolerable rate, but the deviation rate in the population exceeds the tolerable rate.
D) The deviation rate in the auditor's sample exceeds the tolerable rate, but the deviation rate in the population is less than the tolerable rate.
C) The deviation rate in the auditor's sample is less than the tolerable rate, but the deviation rate in the population exceeds the tolerable rate.
Which of the following statistical selection techniques is least desirable for use by an auditor?
A) Systematic selection.
B) Stratified selection.
C) Block selection.
D) Sequential selection.
C) Block selection.
Which of the following actions should the auditor take in response to discovering a deviation from the prescribed control procedure?
A) Make inquiries to understand the potential consequence of the deviation.
B) Assume that the deviation is an isolated occurrence without audit significance.
C) Report the matter to the next higher level of authority within the entity.
D) Increase sample size of tests of controls.
A) Make inquiries to understand the potential consequence of the deviation.
Which of the following is included as part of the definition of audit sampling?
A) Inquiry and observation procedures.
B) Documentary evidence.
C) Evaluation of some characteristic.
D) Statistical techniques.
C) Evaluation of some characteristic.
Which of the following statements is ordinarily correct about the sample size in statistical sampling when testing controls?
A) The expected population deviation rate has little effect on determining the sample size.
B) As the population size doubles, the sample size should also double.
C) As the tolerable deviation rate increases, the sample size should also increase.
D) The population size has little effect on the sample size.
D) The population size has little effect on the sample size.
An auditor plans to examine a sample of 20 checks for countersignatures as prescribed by the client's internal control activities. One of the checks in the chosen sample of 20 cannot be found. The auditor should consider the reasons for this limitation and
A) Evaluate the results as if the sample size had been 19.
B) Treat the missing check as a deviation for the purpose of evaluating the sample.
C) Treat the missing check in the same manner as the majority of the other 19 checks (i.e., countersigned or not).
D) Choose another check to replace the missing check in the sample.
B) Treat the missing check as a deviation for the purpose of evaluating the sample.
Which of the following is the primary objective of probability-proportional-to-size sampling?
A) To identify overstatement errors.
B) To increase the proportion of smaller-value items in the sample.
C) To identify items where controls were not properly applied.
D) To identify zero and negative balances.
A) To identify overstatement errors.
In estimation sampling for attributes, which one of the following must be known in order to appraise the results of the auditor's sample?
A) Estimated dollar value of the population.
B) Standard deviation of the values in the population.
C) Actual occurrence rate of the attribute in the population.
D) Sample size.
D) Sample size.
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 characteristic 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.
A) A randomly chosen sample may not be representative of the population as a whole on the characteristic of interest.
In estimation sampling for variables, which of the following must be known in order to estimate the appropriate sample size required to meet the auditor's needs in a given situation?
A) The qualitative aspects of errors.
B) The total dollar amount of the population.
C) The acceptable level of risk.
D) The estimated rate of error in the population.
C) The acceptable level of risk.
In performing tests of controls, the auditor will normally find that
A) The level of risk is directly proportionate to the rate of error.
B) The rate of deviations in the sample exceeds the rate of error in the accounting records.
C) The rate of error in the sample exceeds the rate of deviations.
D) All unexamined items result in errors in the accounting records.
B) The rate of deviations in the sample exceeds the rate of error in the accounting records.
The objective of the allowance for sampling risk in sampling for tests of controls on internal control is to
A) Determine the probability of the auditor's conclusion based upon reliance factors.
B) Determine that financial statements taken as a whole are not materially in error.
C) Estimate the risk of incorrect acceptance of substantive tests.
D) Estimate the range of procedural deviations in the population.
D) Estimate the range of procedural deviations in the population.
Which of the following characteristics most likely would be an advantage of using classical variables sampling rather than probability-proportional-to-size (PPS) sampling?
A) The selection of negative balances requires no special design considerations.
B) The sampling process can begin before the complete population is available.
C) The auditor need not consider the preliminary judgments about materiality.
D) The sample will result in a smaller sample size if few errors are expected.
A) The selection of negative balances requires no special design considerations.
At times a sample may indicate that the auditor's planned assessed level of control risk is reasonable when, in fact, the true compliance rate does not justify such reliance. This situation illustrates the risk of
A) Assessing control risk too low.
B) Assessing control risk too high.
C) Incorrect precision.
D) Incorrect rejection
A) Assessing control risk too low.
Which of the following statements is correct concerning probability-proportional-to-size (PPS) sampling, also known as dollar unit sampling?
A) The sampling distribution should approximate the normal distribution.
B) Overstated units have a lower probability of sample selection than units that are understated.
C) The auditor controls the risk of incorrect acceptance by specifying that risk level for the sampling plan.
D) The sampling interval is calculated by dividing the number of physical units in the population by the sample size.
C) The auditor controls the risk of incorrect acceptance by specifying that risk level for the sampling plan.
For which of the following audit tests would an auditor most likely use attribute sampling?
A) Inspecting purchase orders for proper approval by supervisors.
B) Making an independent estimate of recorded payroll expense.
C) Determining that all payables are recorded at year-end.
D) Selecting accounts receivable for confirmation of account balances.
A) Inspecting purchase orders for proper approval by supervisors.
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) Which 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.
D) Do not have to be prenumbered in order for the auditor to use the technique.
An auditor may decide to increase the risk of incorrect rejection when
A) Increased reliability from the sample is desired.
B) Many differences (audit value minus recorded value) are expected.
C) Initial sample results do not support the planned level of control risk.
D) The cost and effort of selecting additional sample items is low.
D) The cost and effort of selecting additional sample items is low.
Which of the following statements is correct about the sample size in statistical sampling when testing internal controls?
A) The auditor should consider the tolerable rate of deviation from the controls being tested in determining sample size.
B) As the likely rate of deviation decreases, the auditor should increase the planned sample size.
C) The allowable risk of assessing control risk too low has no effect on the planned sample size.
D) Of all the factors to be considered, the population size has the greatest effect on the sample size.
A) The auditor should consider the tolerable rate of deviation from the controls being tested in determining sample size.
Jones, CPA, believes the industry-wide occurrence rate of client billing errors is 3% and has established a maximum acceptable occurrence rate of 5%. In the review of client invoices Jones should use
A) Discovery sampling.
B) Attribute sampling.
C) Stratified sampling.
D) Variable sampling.
B) Attribute sampling.
In connection with his test of the accuracy of inventory counts, a CPA decides to use discovery sampling. Discovery sampling may be considered a special case of
A) Judgmental sampling.
B) Sampling for variables.
C) Stratified sampling.
D) Sampling for attributes.
D) Sampling for attributes.
The major reason that the difference and ratio estimation methods would be expected to produce audit efficiency is that the
A) Number of members of the populations of differences or ratios is smaller than the number of members of the population of book values.
B) Beta risk may be completely ignored.
C) Calculations required in using difference or ratios estimation are less arduous and fewer than those required when using direct estimation.
D) Variability of the populations of differences or ratios is less than that of the populations of book values or audited values.
D) Variability of the populations of differences or ratios is less than that of the populations of book values or audited values.
In assessing sampling risk, the risk of incorrect rejection and the risk of assessing control risk too high relate to the
A) Efficiency of the audit.
B) Effectiveness of the audit.
C) Selection of the sample.
D) Audit quality controls.
A) Efficiency of the audit.
As a result of sampling procedures applied as tests of controls, an auditor incorrectly assesses control risk higher than appropriate. The most likely explanation for this situation is that
A) The deviation rate in the auditor's sample is less than the tolerable rate, but the deviation rate in the population exceeds the tolerable rate.
B) The deviation rate in the auditor's sample exceeds the tolerable rate, but the deviation rate in the population is less than the tolerable rate.
C) The deviation rates of both the auditor's sample and the population exceed the tolerable rate.
D) The deviation rates of both the auditor's sample and the population are less than the tolerable rate.
B) The deviation rate in the auditor's sample exceeds the tolerable rate, but the deviation rate in the population is less than the tolerable rate.
Which of the following is an element of sampling risk?
A) Choosing an audit procedure that is inconsistent with the audit objective.
B) Choosing a sample size that is too small to achieve the sampling objective.
C) Failing to detect an error on a document that has been inspected by the auditor.
D) Failing to perform audit procedures that are required by the sampling plan.
B) Choosing a sample size that is too small to achieve the sampling objective.
Which of the following statements is generally correct about the sample size in statistical sampling when testing internal controls?
A) As the population size doubles, the sample size should increase by about 67%.
B) The sample size is inversely proportional to the expected error rate.
C) There is no relationship between the tolerable error rate and the sample size.
D) The population size has little or no effect on the sample size.
D) The population size has little or no effect on the sample size.
In a probability-proportional-to-size sample with a sampling interval of $10,000, an auditor discovered that a selected account receivable with a recorded amount of $5,000 had an audit amount of $2,000. The projected error of this sample was
A) $3,000
B) $4,000
C) $6,000
D) $8,000
C) $6,000
Which of the following best describes the distinguishing feature of statistical sampling?
A) It provides for measuring mathematically the degree of uncertainty that results from examining only a part of the data.
B) It allows the auditor to have the same degree of sampling risk as with nonstatistical sampling but with substantially less work.
C) It allows the auditor to substitute sampling techniques for audit judgment.
D) It provides for measuring the actual misstatements in financial statements in terms of sampling risk and allowance for sampling risk.
A) It provides for measuring mathematically the degree of uncertainty that results from examining only a part of the data.
Which of the following ordinarily would be the greatest consideration in planning an effective sample for a test of controls?
A) Preliminary judgments about materiality levels.
B) The auditor's allowable risk of assessing control risk is high.
C) The level of detection for the account.
D) The auditor's allowable risk of assessing control risk is low.
D) The auditor's allowable risk of assessing control risk is low.
Statistical sampling generally may be applied to test controls when the client's internal control activities
A) Depend primarily on appropriate segregation of duties.
B) Are carefully reduced to writing and are included in client accounting manuals.
C) Leave an audit trail in the form of documentary evidence of compliance.
D) Enable the detection of material irregularities in the accounting records.
C) Leave an audit trail in the form of documentary evidence of compliance.
In planning a statistical sample for a test of controls, an auditor increased the expected population deviation rate from the prior year's rate because of the results of the prior year's tests of controls and the overall control environment. The auditor most likely would then increase the planned
A) Tolerable rate.
B) Allowance for sampling risk.
C) Risk of assessing control risk too low.
D) Sample size.
D) Sample size.
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.
B) Variables and attributes.
Which of the following statements is correct concerning statistical sampling in tests of controls?
A) Deviations from control procedures at a given rate usually result in misstatements at a higher rate.
B) As the population size doubles, the sample size should also double.
C) The qualitative aspects of deviations are not considered by the auditor.
D) There is an inverse relationship between the sample size and the tolerable rate.
D) There is an inverse relationship between the sample size and the tolerable rate.
For which of the following audit tests would a CPA most likely use attribute sampling?
A) Identifying entries posted to incorrect accounts.
B) Estimating the amount in an expense account.
C) Evaluating the reasonableness of depreciation expense.
D) Selecting receivables for confirmation of account balances.
A) Identifying entries posted to incorrect accounts.
Which of the following would be a consideration in planning a sample for a test of subsequent cash receipts?
A) Preliminary judgments about materiality levels.
B) The amount of bad debt write-offs in the prior year.
C) The size of the intercompany receivable balance.
D) The auditor's allowable risk of assessing control risk is too low.
A) Preliminary judgments about materiality levels.
An auditor examining inventory most likely would use variables sampling rather than attributes sampling to
A) Identify whether inventory items are properly priced.
B) Estimate whether the dollar amount of inventory is reasonable.
C) Discover whether misstatements exist in inventory records.
D) Determine whether discounts for inventory are properly recorded.
B) Estimate whether the dollar amount of inventory is reasonable.
An advantage of statistical sampling over nonstatistical sampling is that statistical sampling helps an auditor to
A) Minimize the failure to detect errors and irregularities.
B) Eliminate the risk of nonsampling errors.
C) Reduce the level of audit risk and materiality to a relatively low amount.
D) Measure the sufficiency of the audit evidence obtained.
D) Measure the sufficiency of the audit evidence obtained.
To determine the number of items to be selected in a sample for a particular substantive test of details, the auditor should consider all of the following except
A) Tolerable misstatement.
B) Deviation rate.
C) Allowable risk of incorrect acceptance.
D) Characteristics of the population.
B) Deviation rate.
The size of a sample designed for dual-purpose testing should be
A) The larger of the samples that would otherwise have been designed for the two separate purposes.
B) The smaller of the samples that would otherwise have been designed for the two separate purposes.
C) The combined total of the samples that would otherwise have been designed for the two separate purposes.
D) More than the larger of the samples that would otherwise have been designated for the two separate purposes, but less than the combined total of the samples that would otherwise have been designed for the two separate purposes.
A) The larger of the samples that would otherwise have been designed for the two separate purposes.
An auditor discovers that an account balance believed not to be materially misstated based on an audit sample was materially misstated based on the total population of the account balance. This is an example of which of the following sampling types of risks?
A) Incorrect rejection.
B) Incorrect acceptance.
C) Assessing control risk too low.
D) Assessing control risk too high.
B) Incorrect acceptance.
The degree of audit risk always present in an audit engagement is referred to as a combination of nonsampling and sampling risk. Which of the following is an example of nonsampling risk?
A) The auditor selecting inappropriate auditing procedures.
B) The internal control being more effective than the auditor believes.
C) The auditor concluding the account balance is not materially misstated, but is, in fact, materially misstated.
D) The internal control not being as effective as the auditor believes.
A) The auditor selecting inappropriate auditing procedures.
When performing a test of a control with respect to control over cash disbursements, a CPA may use a systematic sampling technique with a start at any randomly selected item. The biggest disadvantage of this type of sampling is that the items in the population
A) Should be recorded in a systematic pattern before the sample can be drawn.
B) May occur in a systematic pattern, thus destroying the sample randomness.
C) May systematically occur more than once in the sample.
D) Should be systematically replaced in the population after sampling.
B) May occur in a systematic pattern, thus destroying the sample randomness.
Which of the following sampling plans would be designed to estimate a numerical measurement of a population, such as a dollar value?
A) Discovery sampling.
B) Numerical sampling.
C) Sampling for variables.
D) Sampling for attributes.
C) Sampling for variables.
What is an auditor's evaluation of a statistical sample for attributes when a test of 50 documents results in 3 deviations if tolerable rate is 7%, the expected population deviation rate is 5%, and the allowance for sampling risk is 2%?
A) Modify the planned assessed level of control risk because the tolerable rate plus the allowance for sampling risk exceeds the expected population deviation rate.
B) Accept the sample results as support for the planned assessed level of control risk because the sample deviation rate plus the allowance for sampling risk exceeds the tolerable rate.
C) Accept the sample results as support for the planned assessed level of control risk because the tolerable rate less the allowance for sampling risk equals the expected population deviation rate.
D) Modify the planned assessed level of control risk because the sample deviation rate plus the allowance for sampling risk exceeds the tolerable rate.
D) Modify the planned assessed level of control risk because the sample deviation rate plus the allowance for sampling risk exceeds the tolerable rate.
If certain forms are not consecutively numbered
A) Selection of a random sample probably is not possible.
B) Systematic sampling may be appropriate.
C) Stratified sampling should be used.
D) Random number tables cannot be used.
B) Systematic sampling may be appropriate.
Use of the ratio estimation sampling technique to estimate dollar amounts is inappropriate when
A) The total book value is known and corresponds to the sum of all the individual book values.
B) A book value for each sample item is unknown.
C) There are some observed differences between audited values and book values.
D) The audited values are nearly proportional to the book values.
B) A book value for each sample item is unknown.
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