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Audit Ch 17
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Terms in this set (30)
Both sampling and nonsampling risks are associated with
Tests of controls
Yes
Substantive tests of transactions
Yes
In the test of details of balances, the auditor wants to make inferences about the entire population based on a sample.
true
What is the purpose of applying stratified sampling to a population?
To avoid items that may
contain misstatements
To emphasize certain items
and deemphasize others
No
Yes
The word below that best explains the relationship between required sample size and the acceptable risk of incorrect acceptance is
inverse
If acceptable audit risk is increased, acceptable risk of incorrect acceptance should be
increased
The risk the auditor is willing to take of accepting a balance as correct when the true misstatement in the balance under audit is greater than the tolerable misstatement is
acceptable risk of incorrect acceptance
ARIA
When errors are found in a sample, auditors in practice generally make the assumption
that the actual sample errors are representative of the population errors.
________ is a method of projecting from the sample to the population to estimate the population misstatement. It assumes that misstatements in the unaudited population are proportional to the misstatements found in the sample.
point estimate
If analytical procedures are performed with no indications of likely misstatements, ARIA will ________ and the sample size will ________.
increase; decrease
The auditor must do misstatement analysis to decide whether any modification of the audit risk model is needed.
true
Acceptable risk of incorrect acceptance (ARIA) and sample size are inversely related; that is, as ARIA increases, sample size decreases.
true
An auditor using nonstatistical sampling
cannot
formally measure sampling error.
true
Required sample size increases as the auditor's tolerable misstatement for an account balance or class of transactions decreases.
true
When using audit sampling for tests of details of balances, the acceptable risk of overreliance must be determined.
false
The most commonly used method of statistical sampling for tests of details of balances is
monetary unit sampling
An auditor uses monetary unit sampling with a sampling interval of $20,000 and detects an item with a recorded amount of $10,000 with an audited value of $4,000. The projected misstatement of the sample is
$12,000
Which of the following item(s) are needed to determine the sample size using MUS?
A point estimate for misstatements
No
Recorded population value
Yes
A confidence factor
Yes
Which of the following is
not
a problem with monetary unit selection?
population items that should have a zero balance but do not
Using statistical sampling to assist in verifying the yearminusend accounts payable balance, an auditor has accumulated the following data
Number of
accounts
Book
balance
Balance
determined by
the auditor
Population:
4,000
$5,000,000
?
Sample:
200
$250,000
$300,000
Projecting the misstatement to the population, the auditor's estimate of yearminusend accounts payable balance would be:
$6,000,000
50,000/250,000=.20
.20*5,000,000=1,000,000
5,000,000+1,000,000=6,000,000
MUS has the statistical simplicity of attributes sampling, yet provides a statistical result expressed as a percentage.
false
When using MUS, the projected misstatement is the percentage misstatement times the sampling interval.
true
You are auditing Nelson and Company and determined that the sample results support a conclusion that the account is materially misstated, when in fact it was not misstated. This illustrates the risk of
incorrect rejection
If the auditor believes that there will be more than just a few exceptions discovered, and desires an accurate estimate of the dollar value of the exceptions, he or she will use
variables sampling
Which of the following sampling plans would be designed to estimate a numerical measurement of a population, such as a dollar value?
variables sampling
Which of the following is not a type of statistical method that provides results in dollar terms?
attributes sampling
Acceptable risk of incorrect rejection is the statistical risk that the auditor has concluded that a population is materially misstated when it is not.
true
Auditors should attempt to minimize ARIA and maximize ARIR.
false
An important statistic to consider when using a statistical sampling audit plan is the population variability. The population variability is measured by the
standard deviation
To calculate the sample size using difference estimation sampling, it is
not
t* necessary for the auditors to have an advance population standard deviation estimate.
false
The population standard deviation has a significant effect on the computed precision interval.
false
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