1
The sample size for a substantive test of details of an account balance is affected by a number of factors. Assuming all other information remains constant, which of the following would lead to a smaller sample size?
A]
Less reliance on internal controls.
B]
An increase in the amount of tolerable misstatement.
C]
Less reliance on substantive analytical procedures.
D]
Larger expected frequency of misstatements.
2
Which of the following sampling methods would be used to estimate a numeric measurement of a population, such as a monetary value?
A]
Random sampling.
B]
Numeric sampling.
C]
Attribute sampling.
D]
Variable sampling.
3
A number of factors influence the sample size for a substantive test of details of an account balance. All other factors being equal, which of the following would lead to a larger sample size?
A]
Greater reliance on internal controls.
B]
Greater reliance on analytical procedures.
C]
Smaller expected frequency of misstatements.
D]
Smaller amount of tolerable misstatement.
4
The risk of incorrect acceptance relates to the
A]
Effectiveness of the audit.
B]
Efficiency of the audit.
C]
Planning materiality.
D]
Allowable risk of tolerable misstatement.
5
An auditor may decide to decrease the desired level of confidence when
A]
Increased reliability based on the sample is desired.
B]
The cost and effort of selecting additional sample items are low.
C]
Many differences [audit value minus recorded value] are expected.
D]
The planned evidence required from a particular test of detail is reduced because of the strength of evidence provided by an improved substantive analytical procedure.
6
Which of the following relationships is correct?
A]
Desired confidence level and sample size are inversely related.
B]
Tolerable misstatement and sample size are inversely related.
C]
Expected misstatement and sample size are inversely related.
D]
Tolerable misstatement and desired confidence level are directly related.
7
Which of the following statements concerning the auditor’s use of statistical sampling is correct?
A]
An auditor needs to estimate the monetary amount of the standard deviation of the population in order to use classical variables sampling.
B]
An assumption of monetary-unit sampling is that the underlying accounting population is normally distributed.
C]
A classical variables sample needs to be designed with special considerations to include negative balances in the sample.
D]
The selection of zero balances usually does not require special sample design considerations when using monetary-unit sampling.
8
In classical variables sampling, 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 misstatements.
B]
The total monetary amount of the population.
C]
The acceptable level of risk.
D]
The estimated percentage of deviations in the population.
9
Which of the following statements concerning monetary-unit sampling is correct?
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 the desired confidence 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.
10
An auditor is performing substantive procedures of pricing and extensions of perpetual inventory balances consisting of a large number of items. Past experience indicates that there may be numerous pricing and extension errors. Which of the following statistical sampling approaches is most appropriate?
A]
Classical variables sampling.
B]
Monetary-unit sampling.
C]
Stop-and-go sampling.
D]
Attribute sampling.
11
When determining the sample size for MUS application, the auditor must determine all of the following except:
A]
The desired confidence level.
B]
The tolerable misstatement.
C]
The expected population misstatement.
D]
The estimated standard deviation.
12
Monetary-unit-sampling [MUS] is less efficient and generally not used if
A]
The auditor’s objective is oriented towards understatements.
B]
Computerized system account balances are being audited.
C]
The account contains a large book value and a large number of transactions.
D]
Statistical conclusions are to be made relating to the sample.
13
Which of the following would most likely be an advantage in using classical variables sampling rather than monetary-unit sampling?
A]
An estimate of the standard deviation of the population’s recorded amounts is not required.
B]
The auditor rarely needs the assistance of a computer program to design an efficient sample.
C]
Inclusion of zero and negative balances generally does not require special design considerations.
D]
Any amount that is individually significant is automatically identified and selected.
14
An auditor would conclude that an account balance is not fairly stated if the __________________ is less than the __________________.
A]
projected misstatement; expected misstatement.
B]
tolerable misstatement; upper misstatement limit.
C]
projected misstatement; upper misstatement limit.
D]
upper misstatement limit; tolerable misstatement.
15
An auditor plans to use a monetary-unit sampling plan with a systematic sample selection on an account balance of €1,000,000. There are over 50 items that make up the account balance, ten of which are individually over €50,000. To ensure that all accounts with balances of at least €50,000 are selected, the minimum sample size should be
A]
10.
B]
20.
C]
30.
D]
50.
16
In a probability-proportional-to-size sample with a sampling interval of €15,000, an auditor discovered that a selected inventory item with a recorded amount of €5,000 had an audited amount of €3,500. If this were the only misstatement discovered by the auditor, the projected misstatement of this sample would be
A]
€1,500.
B]
€4,500.
C]
€5,000.
D]
€6,428.
17
Which of the following statements is true regarding audit sampling?
A]
Audit firms are increasingly utilizing non-statistical sampling plans using their own proprietary software.
B]
Audit firms have reduced their reliance on non-statistical sampling plans using EXCEL and other commercially developed software.
C]
Audit firms are increasingly utilizing statistical sampling plans using their own proprietary software.
D]
Audit firms are increasingly utilizing statistical sampling plans using EXCEL and other commercially developed software.
18
Using the following information and ratio projection, what is the best estimate of the misstatement in the account?
[5.0K]
A]
€5,000.
B]
€75,000.
C]
€83,333.
D]
There is not enough information to determine.
19
Which of the following represents the reason[s] that statistical sampling has fallen out of favour?
A]
Auditors were over-relying on statistical sampling techniques.
B]
There is poor linkage between the applied audit setting and traditional statistical sampling applications.
C]
Both [1] the auditors were over-relying on statistical sampling techniques and [2] there is poor linkage between the applied audit setting and traditional statistical sampling applications.
D]
Statistical sampling is no longer required because information technology allows the auditor to test 100per cent of necessary data.
20
In applying classical variables sampling, an auditor will generally evaluate sample results by calculating the possible error in either direction of a projected misstatement [or point estimate]. This statistical concept is known as
A]
Reliability.
B]
Projected misstatement.
C]
Standard deviation.
D]
Precision [or confidence interval].
21
Which of the following is considered one of the main advantages of classical variables sampling over monetary-unit sampling?
A]
Any amount that is individually significant is automatically identified and selected.
B]
Auditors rarely need the assistance of computer software to design and carry out an effective sampling plan.
C]
Inclusion of zero and negative balances generally do not require special sampling considerations.
D]
An understanding of standard deviation and normal distribution theory is not necessary.
22
An auditor is determining the sample size for an inventory observation using difference estimation [classical variables sampling]. To calculate the required sample size, the auditor usually determines the
|
| Population
Size
| Desired
Confidence
|
A]
No Yes
B]
Yes No
C]
Yes Yes
D]
No No
23
Using classical variables sampling, the projected population misstatement is €40,000 and the confidence bound is €2,400. What amount will be compared to tolerable misstatement to determine whether the account is fairly stated?
A]
€40,000.
B]
€41,200.
C]
€42,400.
D]
There is not enough information given to determine.
How does tolerable misstatement affect sample size?
An increase in tolerable misstatement Decrease The lower the tolerable misstatement, the larger the sample size needs to be.
How would your sample size change if you increased your tolerable misstatement?
The lower the reliance on the results of a substantive procedure using audit sampling, the higher the sampling risk the auditor is willing to accept and, consequently, the smaller the sample size. The higher monetary value of the tolerable misstatement rate, the smaller the sample size and vice versa.
What affects sample size in auditing?
In determining the sample size, the auditor should consider whether sampling risk is reduced to an acceptably low level. Sample size is affected by the level of sampling risk that the auditor is willing to accept. The lower the risk the auditor is willing to accept, the greater the sample size will need to be.
How does control risk affect sample size?
A high control risk assessment may result in a decision not to perform tests of controls. The higher the tolerable rate the lower the sample size and vice versa. If errors are expected, a larger sample usually needs to be examined to confirm that the actual error rate is less than the tolerable error rate.