Deck 2: Auditing and Sampling Techniques

Question 1

The point where the total value of errors in an account becomes unacceptable to audit is called

A)Unacceptable level
B)Materiality level
C)Qualifiable Level
D)None of these

Answer 1

Materiality level

Question 2

The materiality thresholds depend on the ____ of accounts and their _____.

A)Basis, Sensitivity
B)Sensitivity, relativity
C)Basis, accountablity
D)Basis, Value

Answer 2

Basis, Sensitivity

Question 3

For accounts prepared on cash basis, in respect of gross receipts/expenditure, materiality percentage would be

A)For very sensitive accounts - 1 %, sensitive accounts - 1% to 2% and non sensitive accounts - 5%
B)For very sensitive accounts - 1/2 %, sensitive accounts - 1/2% to 2% and non sensitive accounts - 2%
C)For very sensitive accounts - 2 %, sensitive accounts - 5% and non sensitive accounts - 8%
D)none of these

Answer 3

For very sensitive accounts - 1/2 %, sensitive accounts - 1/2% to 2% and non sensitive accounts - 2%

Question 4

Planning materiality may be taken at a lower figure than reporting materiality.

Question 5

Which of the following statements is true about Precision

A)It is a range of error in an account between MLE & materiality
B)It is a range of error in an account between MLE & AMLE
C)It is a range of error in an account between Materiality & AMLE
D)None of these

Question 6

AMLE in the context of likely errors is used in this stage of audit

A)Reporting
B)Evaluation of results
C)Planning
D)Field Audit

Question 7

The formula for calculating precision is

A)(Materiality - Range of error possible) x AMLE
B)(Materiality - AMLE) x Range of error possible
C)(AMLE - Range of error possible) x Materiality
D)None of these

Question 8

There is a direct relationship between materiality level and the level of audit risk

Question 9

The three components of Audit Risk as per the risk model are

A)Inherent Risk, Control Risk, Mitigation Risk
B)Inherent Risk, Control Risk, Litigation Risk
C)Inherent Risk, Control Risk, Detection Risk
D)None of these

Question 10

If the desired overall assurance from audit is 95%, the inherent risk is 40% and the control risk is 50%, what would be the desired assurance from substantive tests

A)90%
B)95%
C)99%
D)75%

Question 11

what are the audit procedures commonly used to obtain audit assurance?

A)Analytical Procedures
B)Systems Based Audit
C)Direct Substantive Testing
D)All of the above

Question 12

Which of the following is not a part of analytical procedures?

A)System Analysis
B)Economic Analysis
C)Regression Analysis
D)Predictive Analysis

Question 13

When you are finding out the inventory-turnover ratio, you are doing

A)Comparison across components
B)Comparison involving a single component
C)Regression analysis
D)Economic analysis

Question 14

This is a technique that creates an equation to reveal how one variable is related to one or more other variables.

A)Comparison across components
B)Predictive Analysis
C)Regression analysis
D)Economic analysis

Question 15

Which of the audit procedures is a form of inductive reasoning where the reasonableness of the aggregate results is inferred from the evidence of reliability of the individual details that are tested?

A)Analytical Procedures
B)Systems Based Audit
C)Direct Substantive Testing
D)All of the above

Question 16

Which kind of audit sampling is generally used for testing controls?

A)Attribute Sampling
B)Random Sampling
C)Monetary Unit Sampling
D)Stratified Sampling

Question 17

Which method of sampling is expected to produce representative samples?

A)Block Selection
B)Judgmental Sampling
C)Random Sampling
D)Convenient Sampling

Question 18

Which method of sampling is not expected to produce representative samples?

A)Block Selection
B)Random Sampling
C)Systematic Sampling
D)Monetary Unit Sampling

Question 19

A pre-condition for any statistical sampling is the availability of a _______

A)Sampling unit
B)sampling frame
C)Sampling structure
D)All of the above

Question 20

Population is divided into groups, each being fairly homogenous with respect to value and risk in this kind of sampling

A)Block Selection
B)Random Sampling
C)Stratified Sampling
D)Monetary Unit Sampling

Question 21

Sampling interval is calculated in this kind of sampling

A)Simple Random Sampling
B)Systematic Sampling
C)Stratified Sampling
D)All of the above

Question 22

This method of sampling is also called probability proportionate to size (PPS) sampling

A)Block Selection
B)Random Sampling
C)Stratified Sampling
D)Monetary Unit Sampling

Question 23

Extrapolation of sampling results to the population is possible in the case of Judgmental Sampling.

Question 24

Risk assessment is primarily a part of which of these stages in the audit process?

A)Planning
B)Excecution
C)Reporting
D)Follow up

Question 25

Reflecting all the transactions relating to the period of the accounts without regard to the actual date of payment or receipt is also called

A)Accrual system accounting
B)Mercantile system of accounting
C)Both A & B
D)None of these