Question 1

Which of the following selection methods is least likely to result in a sample representative of all transactions?

Accepted Answer

A

Question 2

The risk of assessing control risk too low can lead to ________.

Accepted Answer

Assessing control risk too low can lead to the auditor failing to do additional work that should be done, such as testing controls that may be ineffective or not existent, resulting in a higher risk of material misstatement not being detected. This can potentially result in an audit opinion that is not appropriate given the level of risk in the financial statements.

Question 3

Non-statistical sampling may be better to use than statistical sampling when ________.

Accepted Answer

C

Question 4

In auditing,anomalies can be defined as: _____.

Accepted Answer

The answer of In auditing,anomalies can be defined as: _____.
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Question 5

Each of the elements within the set of all elements that comprise an account balance or a class of transactions is referred to as a ________.

Accepted Answer

Population unit refers to each of the elements within the set of all elements that comprise an account balance or a class of transactions. Sampling unit refers to the unit of analysis or measurement selected from the population for the purpose of the sample. Sample refers to the selected subset of the population used to represent the characteristics of the whole population. Therefore, option C is the most appropriate choice. Option D is incorrect as it refers to the entire set of elements being studied, rather than each individual element. Option A is incorrect as it refers to the specific units selected for the sample, rather than the elements themselves. Option B is incorrect as it refers to the selected subset, rather than each individual element.

Question 6

Which of the following is an advantage of statistical sampling?

Accepted Answer

The answer of Which of the following is an advantage...

Question 7

The probability that an auditor's conclusion based on a sample might differ from the auditor's conclusion based on an audit of the entire population identifies the concept of ________.

Accepted Answer

Sampling risk refers to the possibility of an auditor's conclusion based on a sample differing from the conclusion they would have drawn had they audited the entire population. This concept is closely related to statistical sampling techniques and is an important consideration for auditors when designing and evaluating their audit procedures. Confidence levels and tolerable rates and expected deviation rates are also important concepts in auditing, but they are not directly related to the issue of sampling risk.

Question 8

As a result of tests of controls,an auditor assessed control risk too low and decreased substantive testing.This assessment resulted because the true deviation rate in the population was ________.

Accepted Answer

The auditor assessed control risk too low because the true deviation rate in the population was more than the deviation rate observed in the auditor's sample. This led to an underestimation of the risk and a decrease in substantive testing.

Question 9

The purpose of tests of controls is to determine whether ________.

Accepted Answer

Tests of controls are conducted to determine whether internal control policies and procedures are functioning effectively and as intended. These tests are performed to assess the risk of material misstatement in the financial statements, and they help auditors determine whether they can rely on the effectiveness of internal controls in planning and performing substantive audit procedures. Tests of controls are not designed to detect errors or irregularities but to provide assurance that the internal control system is working as expected.

Question 10

An advantage of statistical sampling over non-statistical sampling is that statistical sampling helps an auditor to ________.

Accepted Answer

Statistical sampling allows an auditor to use mathematical techniques to determine an appropriate sample size based on desired confidence levels and tolerances for error, thus making a preliminary estimate of the sample size more systematic and grounded in statistical theory.

Question 11

In an auditing context,which of the following scenarios describes a type II error?

Accepted Answer

A type II error in auditing occurs when the auditor fails to identify a problem that actually exists, such as not detecting a material misstatement that is present.

Question 12

In addition to population size,which of the following is used in attribute sampling to determine the sample size?

Accepted Answer

In attribute sampling, the sample size is determined by considering the sampling risk, tolerable deviation rate, and expected population deviation rate. Sampling risk relates to the risk of reaching an incorrect conclusion, the tolerable deviation rate is the maximum error rate the auditor is willing to accept, and the expected population deviation rate is the auditor's estimate of the actual error rate in the population.

Question 13

The risk of assessing control risk too high is the risk that the evidence of compliance with control procedures in the sample indicates ________.

Accepted Answer

Assessing control risk too high means the auditor believes the internal controls are less effective than they actually are, leading to unnecessary additional testing. Option C correctly describes this scenario, where the evidence suggests a higher control risk than warranted by the actual compliance level.

Question 14

Which of the following audit procedures is NOT typically used in audit sampling applications?

Accepted Answer

Observation of personnel and procedures is not typically used in audit sampling applications because audit sampling involves the selection and evaluation of a sample from a population to make a conclusion about that population. Observation is more about assessing the process or controls in place rather than evaluating the accuracy or existence of recorded amounts or transactions.

Question 15

Which description best illustrates sampling risk?

Accepted Answer

Sampling risk is the risk that the sample selected by the auditor is not representative of the population being tested. Choosing a sample that does not represent the population increases the risk of errors in the audit conclusion. Option A relates to the risk of inappropriate audit procedures, option B relates to the risk of detection risk, and option C relates to the risk of errors in statistical analysis.

Question 16

Which of the following is a term used to describe a departure from a prescribed internal control procedure?

Accepted Answer

An exception is a term used to describe a departure from a prescribed internal control procedure. An exception occurs when a process or control function does not work as it should or when an error is made. This can be caused by a variety of factors, such as human error, system malfunctions, or inadequate procedures. Exceptions should be reported and addressed promptly to minimize their impact on the organization.

Question 17

The probability of concluding from a control test sample that the control risk is low,when in fact the risk should be assessed as high,is known as _____.

Accepted Answer

The risk of assessing the control risk too low refers to the risk of concluding, based on the results of a control test sample, that the control risk is low when it should be high. This risk is specific to the auditor's assessment of control risk and is separate from sampling risk, information risk, and inherent risk.

Question 18

In testing controls over invoices,an auditor discovers that in 10% of her statistical sample invoices were for amounts greater than the actual quantity shipped.In such a case,an appropriate response for her would be to __________.

Accepted Answer

10% of the statistical sample having invoices for amounts greater than the actual quantity shipped indicates a potential control weakness. Increasing the sample size will help the auditor determine the extent of the control weakness and whether this is a pervasive issue or a one-time occurrence. This will help the auditor in determining the further course of action. Recalculating control risk or concluding that controls work at 90% effectiveness may not be appropriate until the extent of the control weakness is known. A fraud investigation may be considered later, but increasing the sample size is the initial appropriate response.

Question 19

When performing the substantive tests on an account balance,the auditor is concerned about two aspects of sampling-based decision errors: (1)the risk of incorrect rejection (RIR)and (2)the risk of incorrect acceptance (RIA).Which of the following is true about RIR and RIA?

Accepted Answer

RIA is of greater concern because it relates to the risk that the auditor concludes that a material misstatement does not exist when, in fact, it does. This could lead to the auditor issuing an incorrect opinion on the financial statements, which is a significant concern.

Question 20

For which of the following audit tests is an auditor most likely to use attribute sampling?

Accepted Answer

Attribute sampling is used to test for the presence or absence of certain qualities or attributes in a sample of items. Inspecting employee time cards for proper approval by supervisors is an example of testing for a specific attribute (proper approval), making it the most likely scenario where attribute sampling would be used.

Quiz 10: Audit Sampling