Question 1

If an auditor, planning to use statistical sampling, is concerned with the number of a client's sales invoices that contain mathematical errors, the auditor would most likely utilize which sampling technique?
A) Random sampling with replacement
B) Sampling for attributes
C) Ssampling for variables
D) Stratified random sampling

Accepted Answer

Sampling for attributes is the most appropriate sampling technique when the objective is to test for the presence or absence of a specific characteristic or attribute, such as the occurrence of mathematical errors in sales invoices. This technique involves selecting a sample of items and determining whether or not they possess the attribute of interest. The results of the sample can then be extrapolated to the entire population to estimate the overall incidence of the attribute.

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 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, it means that the control process is effective and efficient. As a result, the computed upper exception rate would be lower, and there is less risk that the actual exception rate exceeds the tolerable exception rate. Therefore, the computed upper exception rate would be less than the tolerable exception rate.

Question 4

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

The answer of A principal advantage of statistical methods of...

Question 5

If the size of the sample to be used in a test of attributes is not determined by using statistical concepts, but the sample is chosen in accordance with random selection procedures:
A) no inferences can be drawn from the sample.
B) the auditor has committed a nonsampling error.
C) the auditor may or may not achieve the tolerable exception rate at the acceptable risk of assessing control risk too low.
D) the auditor will have to evaluate results using the principles of discovery sampling.

Accepted Answer

Even though the sample size has not been determined using statistical concepts, random selection procedures still ensure that the sample is representative of the population. However, since the sample size has not been determined by statistical methods, the auditor may or may not achieve the tolerable exception rate at the acceptable risk of assessing control risk too low. This means the auditor needs to exercise professional judgment in evaluating the results obtained from the sample.

Question 6

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 used when auditing for the occurrence of a specific attribute or condition, in this case, billing errors. It is the appropriate method to use when the population is homogenous and the tolerable deviation rate is less than 10%. Stratified sampling would be appropriate if the population can be divided into homogeneous subgroups, but that is not given in the information provided. Classical sampling and proportional sampling are not appropriate for auditing for specific attributes like billing errors.

Question 7

The higher the assessed control risk, the lower will be the acceptable risk of assessing control risk too low.

Accepted Answer

The answer of The higher the assessed control risk, the...

Question 8

Match eight of the terms (a-k) with the definitions provided below (1-8):
a. Haphazard selection
b. Attributes sampling
c. Block sample selection
d. Judgmental sampling
e. Non-probabilistic sample selection
f. Probabilistic sample selection
g. Random sample
h. Representative sample
i. Statistical sampling
j. Systematic sample selection
k. Sampling distribution
________ 1. The use of mathematical measurement techniques to calculate formal statistical results and quantify sampling risk.
________ 2. A non-probabilistic method of sample selection in which items are selected in measured sequences.
________ 3. A sample whose characteristics are the same as those of the population.
________ 4. 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.
________ 5. A non-probabilistic method of sample selection in which items are chosen without regard to their size, source, or other distinguishing characteristics.
________ 6. An auditor selects items such that each population item has a known probability of being included in the sample.
________ 7. 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.
________ 8. A sample in which every possible combination of elements in the population has an equal chance of constituting the sample.

Accepted Answer

The answer of Match eight of the terms (a-k) with...

Question 9

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 used to determine if a specific attribute (such as credit approval by the credit manager) is present in a sample of transactions. Therefore, examining a sample of duplicate sales invoices for credit approval by the credit manager would be an appropriate procedure to use attributes sampling on. The other procedures listed would be better suited for other sampling methods, such as substantive testing or tests of controls.

Question 10

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 11

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) The computed upper exception rate is the highest exception rate in the population that the auditor is willing to accept.
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 risk of overreliance, it should be the same as the ARACR used for determining the initial sample size.

Accepted Answer

The computed upper exception rate is not the highest exception rate the auditor is willing to accept; it is the highest rate the auditor expects to find in the population, given the sample results and a specified level of confidence.

Question 12

What is an auditor's evaluation of a statistical sample for attributes when a test of 100 documents results in four exceptions if the tolerable exception rate is 5%, the expected population exception rate is 3%, and the allowance for sampling risk is 2%?
A) Accept the sample results as support for planned reliance on the control because the tolerable rate less the allowance for sampling risk equals the expected population exception rate.
B) Modify planned reliance on the control because the sample exception rate plus the allowance for sampling risk exceeds the tolerable rate.
C) Modify planned reliance on the control because the tolerable rate plus the allowance for sampling risk exceeds the expected population exception rate.
D) Accept the sample results as support for planned reliance on the control because the sample deviation rate plus the allowance for sampling risk exceeds the tolerable rate.

Accepted Answer

The auditor's evaluation of a statistical sample for attributes involves comparing the sample exception rate to the tolerable rate taking into account the allowance for sampling risk. In this case, the tolerable exception rate is 5%, the expected population exception rate is 3%, and the allowance for sampling risk is 2%. The sample exception rate is 4%, which is less than the expected population exception rate but exceeds the tolerable rate less the allowance for sampling risk (which is 3%). Therefore, the auditor should modify planned reliance on the control because the sample exception rate plus the allowance for sampling risk exceeds the tolerable rate.

Question 13

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

Accepted Answer

The answer of In nonstatistical sampling, the calculated sampling error...

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. 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 15

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 16

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 17

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 answer of In using sampling distribution for attributes, which...

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

If an auditor, planning to use statistical sampling, is concerned with the number of a client's sales invoices that contain mathematical errors, the auditor would most likely utilize which sampling technique?

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

If the size of the sample to be used in a test of attributes is not determined by using statistical concepts, but the sample is chosen in accordance with random selection procedures:

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:

The higher the assessed control risk, the lower will be the acceptable risk of assessing control risk too low.

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

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?

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?

What is an auditor's evaluation of a statistical sample for attributes when a test of 100 documents results in four exceptions if the tolerable exception rate is 5%, the expected population exception rate is 3%, and the allowance for sampling risk is 2%?

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

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.

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

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