Question 1

In deciding on sampling technique, the auditor will:
A) choose sampling with replacement for a smaller sample size.
B) choose sampling without replacement for a smaller sample size.
C) It doesn't matter which method is used as the auditor can ignore duplicates.
D) None of the above.

Accepted Answer

Sampling without replacement is generally considered to be a more appropriate technique when dealing with smaller sample sizes, as it provides better control over the risk of selecting the same item more than once. Sampling with replacement may be more appropriate for larger sample sizes, where the effect of duplicates is more likely to be minimized. Therefore, choice B is the best option for a smaller sample size.

Question 2

Classical variables sampling can:
A) be applied to overstatements.
B) be applied to understatements.
C) is easier to use than other methods.
D) Both a and b.

Accepted Answer

Classical variables sampling can be applied to both overstatements and understatements, making it a useful tool for detecting both types of errors. However, it may not necessarily be easier to use than other sampling methods, as different methods may be more appropriate depending on the specific circumstances of the audit.

Question 3

A client has a large number of small account balances, with an equal likelihood of over and understatement. Which of the following sampling techniques would be most appropriate?
A) Monetary unit sampling.
B) Classical variables sampling.
C) Attribute sampling.
D) All of the above, depending on the circumstances.

Accepted Answer

Classical variables sampling is appropriate for estimating the total amount of misstatement in a population, especially when dealing with a large number of small account balances with equal likelihood of over and understatement.

Question 4

A client has a small number of large account balances, with a greater likelihood of over rather than understatement. Which of the following sampling techniques would be most appropriate?
A) Monetary unit sampling.
B) Classical variables sampling.
C) Attribute sampling.
D) All of the above, depending on the circumstances.

Accepted Answer

Monetary unit sampling is appropriate when there are a small number of large account balances with a greater likelihood of overstatement. This approach focuses on individual monetary units rather than individual transactions or accounts.

Question 5

When using monetary unit sampling,
A) smaller amounts are more likely to be sampled.
B) larger amounts are more likely to be sampled.
C) offers automatic stratification.
D) both b and c.

Accepted Answer

When using monetary unit sampling, every dollar amount in the population has an equal chance of being selected. Therefore, smaller amounts are just as likely to be sampled as larger amounts. Monetary unit sampling does not offer automatic stratification, as the sample is randomly selected based on dollar values.

Quiz 9: Substantive Procedures and the Financial Statement Audit

In deciding on sampling technique, the auditor will:

Classical variables sampling can:

A client has a large number of small account balances, with an equal likelihood of over and understatement. Which of the following sampling techniques would be most appropriate?

A client has a small number of large account balances, with a greater likelihood of over rather than understatement. Which of the following sampling techniques would be most appropriate?

When using monetary unit sampling,