Question 1

As the auditor you are assessing the proper sample size to use in testing controls.When using attributes sampling which of the following is most correct?
A)A 10% change in population size will have the least effect on sample size.
B)A 10% change in the tolerable deviation rate will have the least effect on sample size.
C)A 10% change in the expected deviation rate will have the least effect on sample size.
D)A 10% change in the tolerable will have the least effect on sample size.

Accepted Answer

The answer of As the auditor you are assessing the...

Question 2

In attributes sampling, an estimate of the expected population exception rate is necessary to plan the sample size.The relationship of expected population exception rate (EPER)to sample size is:
A)direct (small EPER = small sample).
B)inverse (small EPER = large sample).
C)a variable (sometimes small, sometimes large)dependent on other factors present.
D)indeterminate.

Accepted Answer

The answer of In attributes sampling, an estimate of the...

Question 3

In nonstatistical sampling, the calculated sampling error is the difference between the tolerable exception rate and the sample exception rate.

Accepted Answer

This statement is true. Nonstatistical sampling is used to determine the presence of exceptions or errors in a population based on the auditor's judgment. The sampling error is the difference between the tolerable exception rate (the maximum rate of errors that the auditor would find acceptable) and the sample exception rate.

Question 4

In using sampling distribution for attributes, which one of the following must be known to evaluate the sample results?
A)Estimated dollar value of the population
B)Standard exception of the values in the population
C)Actual exception rate of the attribute in the population
D)Sample size

Accepted Answer

The sample size must be known to evaluate the sample results in a sampling distribution for attributes, as it affects the precision and reliability of the results.

Question 5

Attributes sampling is based on the ________ distribution, in which each possible sample in the population has one of two possible values, such as yes or no.
A)random
B)binomial
C)statistical
D)nonstatistical

Accepted Answer

Attributes sampling involves testing the presence or absence of a certain attribute in each individual item in a population, such as whether a product is defective or not. This type of sampling is based on the binomial distribution, which has only two possible outcomes (success or failure) for each trial. Therefore, the best choice for this question is B – binomial. The other options (random, statistical, and nonstatistical) are not specifically related to the type of distribution used in attributes sampling.

Question 6

For which of the following audit procedures would audit sampling not be appropriate?
A)Review sales transactions for large and unusual amounts.
B)Examine a sample of duplicate sales invoices for credit approval.
C)Compare the quantity on duplicate sales invoices with the quantity on related shipping documents.
D)Audit sampling is appropriate for each of the above procedures.

Accepted Answer

Audit sampling is not appropriate for reviewing sales transactions for large and unusual amounts because this procedure typically involves a targeted review of specific, significant items rather than a random or statistical sampling of many items.

Question 7

Tolerable exception rate (TER)is inversely related to sample size.

Accepted Answer

Tolerable exception rate (TER) is the maximum acceptable rate of errors or exceptions in a sample. As the sample size increases, the TER decreases as there is a greater chance of finding errors in a larger sample. Therefore, TER is inversely related to sample size.

Question 8

When deciding the acceptability of the population:
A)the methodology for deciding the acceptability of the population for attributes differs from determining the acceptability for nonstatistical sampling.
B)before the population can be considered acceptable, the CUER determined on the basis of the actual sample results must be less than or equal to TER when both are based on the same ARO.
C)when the CUER is greater than the TER, the auditor must increase the sample size.
D)the CUER is compared with the TER in total, not for each attribute.

Accepted Answer

Before the population can be considered acceptable, the CUER determined on the basis of the actual sample results must be less than or equal to TER when both are based on the same ARO. This ensures that the auditor has achieved the desired level of assurance for the attributes being tested.

Question 9

When the SER exceeds the TER, the auditor should decide whether to increase sample size or to revise assessed control risk on the basis of cost versus benefit.

Accepted Answer

The answer of When the SER exceeds the TER, the...

Question 10

Rodgers CPA believes that the rate of client billing errors is 4% and has established a tolerable deviation rate of 6%.In auditing client invoices Rodgers should use:
A)stratified sampling.
B)classical sampling.
C)proportional sampling.
D)attributes sampling.

Accepted Answer

Attributes sampling is the best choice for auditing client invoices in this scenario as it is used to test compliance with a specific control or procedure, such as the rate of billing errors. This type of sampling relies on binary outcomes (either the attribute is present or it is not), making it appropriate for testing the presence or absence of billing errors. Stratified sampling, classical sampling, and proportional sampling are not appropriate in this scenario as they are used to select a sample based on certain characteristics of the population, such as size or variance, rather than specific attributes.

Question 11

Statistical sampling eliminates any professional judgment for the auditor.

Accepted Answer

Statistical sampling requires professional judgment in determining the sample size, selecting the sample items, evaluating the sample results, and making conclusions about the population. However, statistical sampling does provide a framework to guide the auditor's decision-making process and reduce potential bias.

Question 12

A principal advantage of statistical methods of attributes sampling over nonstatistical methods is that they provide a scientific basis for establishing the:
A)risk of assessing control risk too low.
B)tolerable exception rate.
C)expected population exception rate.
D)sample size.

Accepted Answer

Statistical methods of attributes sampling provide a scientific basis for establishing the sample size, as they use probability theory to determine the sample size needed to achieve a desired level of confidence in the results.

Question 13

When audit procedures have been completed for an attributes sampling application, the auditor must generalize from the sample to the population.Which of the following statements would be incorrect regarding this process?
A)The auditor would use an attributes sampling table to determine the computed upper exception rate.
B)If the sample size is not equal to those provided for in the attributes sampling evaluation tables, the auditor cannot use attribute sampling.
C)It would be wrong for the auditor to conclude that the population exception rate is exactly the same as the sample exception rate.
D)In selecting the table corresponding to the ARO, it should be the same as the ARO used for determining the initial sample size.

Accepted Answer

The statement "If the sample size is not equal to those provided for in the attributes sampling evaluation tables, the auditor cannot use attribute sampling" is incorrect. The auditor can still use attribute sampling, but they would need to calculate their own sample size and use an appropriate statistical formula to determine the computed upper exception rate. The other statements are correct. The auditor would use an attributes sampling table to determine the computed upper exception rate (A). It would be wrong for the auditor to conclude that the population exception rate is exactly the same as the sample exception rate (C). In selecting the table corresponding to the ARO, it should be the same as the ARO used for determining the initial sample size (D).

Question 14

There are 14 steps to attributes sampling, divided into three sections: plan the sample, select the sample and perform the audit procedures, and evaluate the results.Discuss the three steps that comprise the "evaluate the results" section.

Accepted Answer

The answer of There are 14 steps to attributes sampling,...

Question 15

When the sample exception rate is greater than the tolerable exception rate in attributes sampling, one possible appropriate course of action is to increase sample size.

Accepted Answer

Increasing sample size can help to reduce sampling error and provide a more accurate estimate of the true exception rate. This can help to bring the sample exception rate closer to the tolerable exception rate and improve the reliability of the results.

Question 16

Attributes sampling would be an appropriate method to use on which one of the following procedures in an audit program?
A)Review sales transactions for large and unreasonable amounts.
B)Observe whether the duties of the accounts receivable clerk are separate from handling cash.
C)Examine a sample of duplicate sales invoices for credit approval by the credit manager.
D)Review the aged schedule of accounts receivable to determine if receivables from officers are included.

Accepted Answer

Attributes sampling is appropriate when testing for compliance with specific criteria, such as credit approval for sales invoices. Reviewing sales transactions for large and unreasonable amounts (A) would require substantive testing, observing duties of the accounts receivable clerk (B) would require observation, and reviewing the aged schedule of accounts receivable (D) would require substantive testing.

Question 17

In the evaluation of the results of an attributes sample, the fact that the exception rate in the sample was 2% rather than the estimated population exception rate of 4% would cause the computed upper exception rate to:
A)be less than the tolerable exception rate.
B)equal the tolerable exception rate.
C)exceed the tolerable exception rate.
D)cannot be determined from the information given.

Accepted Answer

If the exception rate in the sample is lower than the estimated population exception rate, then the computed upper exception rate will also be lower. This means that it is less likely to exceed the tolerable exception rate, making choice A the best option.

Question 18

There are 14 steps to attributes sampling, divided into three sections: plan the sample, select the sample and perform the audit procedures, and evaluate the results.In the planning section there are 9 steps, beginning with "state the audit objective" and ending with "determine the initial sample size." Name and discuss at least 3 steps between the ones listed above.

Accepted Answer

The answer of There are 14 steps to attributes sampling,...

Question 19

Match between columns
                        Premises: The use of mathematical measurement techniques to calculate formal statistical results and quantify sampling risk.
A non-probabilistic method of sample selection in which items are chosen without regard to their size, source, or other distinguishing characteristics.
A sample in which every possible combination of elements in the population has an equal chance of constituting the sample.
An auditor selects items such that each population item has a known probability of being included in the sample.
A sample whose characteristics are the same as those of the population.
A non-probabilistic method of sample selection in which items are selected in measured sequences.
A frequency distribution of the results of all possible samples of a specified size that could be obtained from a population containing some specific parameters.
A statistical, probabilistic method of sample evaluation that results in an estimate of the proportion of items in a population containing a characteristic of interest.

Accepted Answer

The Answer of Statistical sampling and Sampling distribution and Non-probabilistic is...

Quiz 15: Audit Sampling for Tests of Controls and Substantive Tests of Transactions

As the auditor you are assessing the proper sample size to use in testing controls.When using attributes sampling which of the following is most correct?

In attributes sampling, an estimate of the expected population exception rate is necessary to plan the sample size.The relationship of expected population exception rate (EPER) to sample size is:

In nonstatistical sampling, the calculated sampling error is the difference between the tolerable exception rate and the sample exception rate.

In using sampling distribution for attributes, which one of the following must be known to evaluate the sample results?

Attributes sampling is based on the ________ distribution, in which each possible sample in the population has one of two possible values, such as yes or no.

For which of the following audit procedures would audit sampling not be appropriate?

Tolerable exception rate (TER)is inversely related to sample size.

When deciding the acceptability of the population:

When the SER exceeds the TER, the auditor should decide whether to increase sample size or to revise assessed control risk on the basis of cost versus benefit.

Rodgers CPA believes that the rate of client billing errors is 4% and has established a tolerable deviation rate of 6%.In auditing client invoices Rodgers should use:

Statistical sampling eliminates any professional judgment for the auditor.

A principal advantage of statistical methods of attributes sampling over nonstatistical methods is that they provide a scientific basis for establishing the:

When audit procedures have been completed for an attributes sampling application, the auditor must generalize from the sample to the population.Which of the following statements would be incorrect regarding this process?

There are 14 steps to attributes sampling, divided into three sections: plan the sample, select the sample and perform the audit procedures, and evaluate the results.Discuss the three steps that comprise the "evaluate the results" section.

When the sample exception rate is greater than the tolerable exception rate in attributes sampling, one possible appropriate course of action is to increase sample size.

Attributes sampling would be an appropriate method to use on which one of the following procedures in an audit program?

In the evaluation of the results of an attributes sample, the fact that the exception rate in the sample was 2% rather than the estimated population exception rate of 4% would cause the computed upper exception rate to:

Match eight of the terms (a-k)with the definitions provided below (1-8):