Question 1

The sample size is inversely related to the computed precision interval in difference estimation; that is, as sample size increases, the computed precision interval decreases.

Accepted Answer

This statement is true. As sample size increases, the standard error decreases, which means that the computed precision interval will also decrease.

Question 2

Acceptable risk of incorrect rejection is the statistical risk that the auditor has concluded that a population is materially misstated when it is not.

Accepted Answer

Acceptable risk of incorrect rejection involves the risk of concluding that a population is materially misstated when it is not, which means that the auditor rejects a correct population, leading to false conclusions.

Question 3

Difference estimation frequently results in smaller sample sizes than any other variables sampling method.

Accepted Answer

This is true because difference estimation relies on the difference between two populations, rather than estimating the actual values of each population. This can allow for more precision in the sample size needed to achieve a certain level of confidence in the results.

Question 4

Explain the decision rule used with difference estimation sampling to determine whether the population is acceptable.

Accepted Answer

The answer of Explain the decision rule used with difference...

Question 5

Explain acceptable risk of incorrect acceptance and acceptable risk of incorrect rejection within the context of variables sampling.

Accepted Answer

The answer of Explain acceptable risk of incorrect acceptance and...

Question 6

The nine steps in planning the sample are almost identical for nonstatistical sampling and difference estimation. However, there are three important differences. Discuss each of the three differences.

Accepted Answer

The answer of The nine steps in planning the sample...

Question 7

The major reason that the difference and ratio estimation methods would be expected to produce audit efficiency is that the:
A) beta risk may be completely ignored.
B) variability of the populations of differences or ratios is less than that of the populations of book values or audited values.
C) number of members of the populations of differences or ratios is smaller than the number of members of the population of book values.
D) calculations required in using difference or ratio estimation are less arduous and fewer than those required when using direct estimation.

Accepted Answer

The variability of populations of differences or ratios is expected to be less than that of populations of book values or audited values, making audit efficiency higher with the use of difference or ratio estimation methods.

Question 8

An important statistic to consider when using a statistical sampling audit plan is the population variability. The population variability is measured by the:
A) sample mean.
B) standard deviation.
C) standard error of the sample mean.
D) estimated population total minus the actual population.

Accepted Answer

Population variability is measured by the standard deviation. The sample mean (A) is simply the average value of the sample obtained from the population. The standard error of the sample mean (C) is a measure of the precision of the sample mean and is calculated by dividing the standard deviation by the square root of the sample size. The estimated population total minus the actual population (D) is not a measure of population variability but rather a measure of the accuracy of the estimate.

Question 9

Which of the following is not a type of statistical method that provides results in dollar terms?
A) Variables sampling
B) Attributes sampling
C) Monetary-unit sampling
D) Sampling with probability proportional to size

Accepted Answer

Attributes sampling focuses on identifying the presence or absence of certain qualities or characteristics, and does not provide results in dollar terms. Variables sampling, monetary-unit sampling, and sampling with probability proportional to size all provide results in dollar terms.

Question 10

Match six of the terms (a-l) with the definitions provided below (1-6):
a. Acceptable risk of incorrect acceptance
b. Acceptable risk of incorrect rejection
c. Difference estimation
d. Misstatement bounds
e. Monetary-unit sampling
f. Mean-per-unit estimation
g. Point estimate
h. Probability proportional to size sample selection
i. Ratio estimation
j. Statistical inferences
k. Stratified sampling
l. Variable sampling
________ 1. Conclusions drawn from sample results based on knowledge of sampling distributions.
________ 2. Sampling techniques for tests of details that use the statistical inference processes.
________ 3. The risk that the auditor is willing to take of concluding a balance is materially misstated when it is, in fact, fairly stated.
________ 4. A statistical sampling method that provides upper and lower misstatement bounds expressed in monetary amounts.
________ 5. A method of variables sampling in which the auditor estimates the population misstatement by multiplying the average misstatement in the sample by the total number of population items and also calculates sampling risk.
________ 6. The risk that the auditor is willing to take of accepting a balance as correct when the true misstatement in the balance is greater than tolerable misstatement.

Accepted Answer

The answer of Match six of the terms (a-l) with...

Question 11

The confidence limits in variables sampling are similar to the monetary-unit sampling's:
A) point estimate.
B) misstatement bounds.
C) standard deviation.
D) standard error of the mean.

Accepted Answer

Confidence limits in variables sampling represent the range within which misstatements in the population may lie, which is similar to the misstatement bounds in monetary-unit sampling. The other choices are not directly related to confidence limits in variables sampling.

Question 12

There are four steps to generalize from the sample to the population using difference estimation sampling. Identify each of these four steps.

Accepted Answer

The answer of There are four steps to generalize from...

Question 13

The population standard deviation of the misstatements from the sample is inversely related to the computed precision interval in difference estimation; that is, as the standard deviation increases, the computed precision interval decreases.

Accepted Answer

The statement is false. As the population standard deviation increases, the computed precision interval also increases. This is because a higher standard deviation indicates more variability in the sample and, consequently, a larger interval is necessary to capture the range of possible values for the population parameter of interest.

Question 14

In difference estimation sampling, the confidence limits are calculated by combining the point estimate of the total misstatements and the computed precision interval at the desired confidence level.

Accepted Answer

This is a correct statement about difference estimation sampling.

Quiz 17: Audit Sampling for Tests of Details and Balances

The sample size is inversely related to the computed precision interval in difference estimation; that is, as sample size increases, the computed precision interval decreases.

Acceptable risk of incorrect rejection is the statistical risk that the auditor has concluded that a population is materially misstated when it is not.

Difference estimation frequently results in smaller sample sizes than any other variables sampling method.

Explain the decision rule used with difference estimation sampling to determine whether the population is acceptable.

Explain acceptable risk of incorrect acceptance and acceptable risk of incorrect rejection within the context of variables sampling.

The nine steps in planning the sample are almost identical for nonstatistical sampling and difference estimation. However, there are three important differences. Discuss each of the three differences.

The major reason that the difference and ratio estimation methods would be expected to produce audit efficiency is that the:

An important statistic to consider when using a statistical sampling audit plan is the population variability. The population variability is measured by the:

Which of the following is not a type of statistical method that provides results in dollar terms?

The confidence limits in variables sampling are similar to the monetary-unit sampling's:

There are four steps to generalize from the sample to the population using difference estimation sampling. Identify each of these four steps.

The population standard deviation of the misstatements from the sample is inversely related to the computed precision interval in difference estimation; that is, as the standard deviation increases, the computed precision interval decreases.

In difference estimation sampling, the confidence limits are calculated by combining the point estimate of the total misstatements and the computed precision interval at the desired confidence level.