Question 1

The advantage of systematic sample selection is that:
A) it is easy to use.
B) it is unnecessary to determine if the population is arranged randomly.
C) there is limited possibility of it being biased.
D) all of the above

Accepted Answer

A

Question 2

The point estimate, by itself, is NOT an adequate measure of the population misstatement because of:
A) sampling error.
B) control risk.
C) population biases.
D) audit risk.

Accepted Answer

The point estimate is calculated from a sample, and there is always a chance that the sample is not fully representative of the population due to sampling error. As a result, the point estimate alone is not sufficient to determine the population misstatement. Audit risk, control risk, and population biases can all impact the accuracy of the point estimate, but the primary concern is the potential for sampling error.

Question 3

In audit sampling, an advance estimate of the deviation rate is necessary to plan the appropriate sample size. The relationship of estimated population deviation rate (EPDR) to sample size is:
A) indeterminate.
B) direct (small EPDR = small sample).
C) inverse (small EPDR = large sample).
D) a variable (sometimes small, sometimes large) dependent on other factors present.

Accepted Answer

A smaller estimated population deviation rate (EPDR) suggests that fewer deviations are expected, allowing for a smaller sample size to achieve the desired level of confidence in the audit results.

Question 4

When errors are found, a common assumption in practice is to assume:
A) that the population errors are smaller than the sample errors.
B) that the population errors are larger than the sample errors.
C) that misstatements in the unaudited population are proportional to the misstatements in the sample.
D) a 100% assumption for all errors.

Accepted Answer

The assumption that misstatements in the unaudited population are proportional to the misstatements in the sample is a reasonable assumption, as it allows auditors to estimate the total likely misstatement in the population based on the misstatement found in the sample. This assumption is known as the projection assumption, and is based on the concept of sampling risk. While it is not always 100% accurate, it is a practical assumption that can help auditors identify areas of potential risk in the audited population.

Question 5

As a result of tests of controls, an auditor assessed control risk too low and decreased substantive testing. This occurred because the true deviation rate in the population was:
A) more than the deviation rate in the auditor's sample.
B) less than the risk of assessing control risk too low based on the auditor's sample.
C) more than the risk of assessing control risk too low based on the auditor's sample.
D) less than the deviation rate in the auditor's sample.

Accepted Answer

The auditor assessed control risk too low because the true deviation rate in the population was more than the deviation rate in the auditor's sample, leading to an incorrect conclusion about the effectiveness of the controls.

Question 6

Which one of the following is an advantage of systematic sample selection over random number sampling?
A) It does not require establishment of correspondence between random numbers and items in the population.
B) It provides a stronger basis for statistical conclusions.
C) There may be correlation between the location of items in the population, the feature of sampling interest and the sampling interval.
D) It enables the auditor to use the more efficient 'sampling with replacement' tables.

Accepted Answer

Systematic sample selection does not require the establishment of correspondence between random numbers and items in the population, whereas random number sampling does require such correspondence. This advantage simplifies the selection process and reduces the potential for errors.

Question 7

Which one of the following statements regarding block sampling is NOT true?
A) A 'reasonable number' for most situations is probably at least six blocks from six different months.
B) Once the first item in the block is selected, the remainder of the block is chosen automatically.
C) It is acceptable to use block sampling for tests of transactions only if a reasonable number of blocks are used.
D) Block sampling is the selection of several items in sequence.

Accepted Answer

Block sampling does not require a specific number of blocks from different months; the number of blocks depends on the audit's objectives and the population's characteristics.

Question 8

In monetary- unit sampling, the values of the estimated likely maximum misstatements are referred to as the:
A) point estimates.
B) confidence intervals.
C) misstatement bounds.
D) precision intervals.

Accepted Answer

The estimated likely maximum misstatements in monetary-unit sampling are referred to as misstatement bounds.

Question 9

If the auditor believes that there will be more than just a few exceptions discovered and desires an accurate estimate of the dollar value of the exceptions, he or she will use:
A) attributes sampling.
B) variables sampling.
C) block sampling.
D) monetary- unit sampling.

Accepted Answer

The answer of If the auditor believes that there will...

Question 10

Which of the following factors is generally NOT considered in determining sample size for a test of controls?
A) Population size
B) Expected population deviation rate
C) Risk of assessing control risk too low
D) Tolerable deviation rate

Accepted Answer

Population size is not generally considered in determining sample size for a test of controls. The other factors listed (expected population deviation rate, risk of assessing control risk too low, and tolerable deviation rate) are all factors that are typically considered in determining sample size.

Question 11

When the computed upper deviation rate is greater than the tolerable deviation rate, it is necessary for the auditor to take specific action. Which of the following courses of action would be most difficult to defend if the auditor is ever subject to review by a court?
A) Revise and relax the tolerable deviation rate (TDR) or the acceptable risk of assessing control risk too low (ARO).
B) Write a letter to management.
C) Expand the sample size.
D) Revise the assessed control risk.

Accepted Answer

It would be difficult to defend revising and relaxing the tolerable deviation rate or acceptable risk of assessing control risk too low as it may be seen as compromising the quality of the audit and avoiding the need to take necessary actions. The other options (writing a letter to management, expanding the sample size, and revising the assessed control risk) are all acceptable courses of action that do not compromise the quality of the audit.

Question 12

An advantage of using statistical sampling techniques is that such techniques:
A) eliminate the need for judgemental decisions.
B) mathematically measure risk.
C) have been established in the courts to be superior to judgmental sampling.
D) define the values of precision and reliability required to provide audit satisfaction.

Accepted Answer

Statistical sampling techniques allow auditors to mathematically measure risk, which can lead to a more objective and reliable audit process. While statistical sampling may not totally eliminate the need for judgmental decisions, it can significantly reduce subjective bias in the sampling process. The use of statistical sampling techniques has not necessarily been established as superior to judgmental sampling in the courts, and the values of precision and reliability required for audit satisfaction may be determined by a variety of factors beyond sampling techniques.

Question 13

One of the causes of non- sampling error is:
A) the use of inappropriate or ineffective audit procedures.
B) the use of attributes sampling instead of variables sampling.
C) failure to draw a representative sample.
D) failure to draw a random sample.

Accepted Answer

Non-sampling errors are mistakes or biases that occur in the data collection process, such as using inappropriate or ineffective audit procedures.

Question 14

The final step in the evaluation of the audit results is the decision to:
A) decide the acceptability of the population.
B) determine the error in each sample.
C) determine sampling error and calculate the estimated total population error.
D) project the point estimate.

Accepted Answer

The final step in the evaluation of the audit results is to decide the acceptability of the population. This involves analyzing the results of the audit to determine if the population meets the specified criteria for acceptability. This decision is based on the auditor's professional judgment and the level of risk for the client. The other options listed (determining the error in each sample, determining sampling error and calculating the estimated total population error, and projecting the point estimate) are important steps in the audit process, but they do not represent the final step in evaluating the audit results.

Question 15

Monetary- unit sampling is most commonly used when:
A) the population data are maintained on computer files.
B) a dollar result is desired.
C) zero or few exceptions are expected.
D) all of the above

Accepted Answer

Monetary-unit sampling is most commonly used when a dollar result is desired and when the population data are maintained on computer files. It is also used when zero or few exceptions are expected.

Question 16

Which one of the following BEST illustrates the concept of sampling risk?
A) The documents related to the chosen sample may not be available for inspection.
B) A randomly chosen sample may not be representative of the population as a whole on the characteristics of interest.
C) An auditor may select audit procedures that are not appropriate to achieve the specific objective.
D) An auditor may fail to recognise errors in the documents examined for the chosen sample.

Accepted Answer

Sampling risk refers to the risk that the sample selected may not be representative of the population from which it is drawn, or that the auditor may draw an incorrect conclusion about the population based on the sample. Option B best illustrates this concept. Option A represents non-sampling risk, as the availability of documents is not related to the representativeness of the sample. Option C represents detection risk, as it is related to the auditor's performance rather than the sample itself. Option D represents non-sampling risk, as the possibility of failing to recognize errors applies to any sample, not just non-representative ones.

Question 17

Statistical theory proves that in most types of populations to which audit sampling applies, the population size is:
A) not a consideration in determining sample size.
B) a minor consideration in determining sample size.
C) a major consideration in determining sample size.
D) the determining factor in determining sample size.

Accepted Answer

Statistical theory shows that population size has a minor consideration in determining sample size. This means that the sample size can be determined with a reasonable degree of accuracy regardless of the population size.

Question 18

A sample in which every possible combination of items in the population has an equal chance of constituting the sample is a:
A) statistical sample.
B) judgement sample.
C) representative sample.
D) random sample.

Accepted Answer

A random sample is a sample in which every possible combination of items in the population has an equal chance of being selected for the sample. This ensures that the sample is unbiased and representative of the population.

Question 19

The major difference between monetary- unit sampling and attributes sampling is that in MUS:
A) the measure is in dollars.
B) the rate of occurrence is converted to dollars.
C) the measure is the rate of occurrence.
D) the dollars are converted to occurrence rates.

Accepted Answer

In monetary-unit sampling, the measure is in dollars as the sampling unit is monetary value, while in attributes sampling, the measure is the rate of occurrence of a certain attribute.

Question 20

When the auditor intends to evaluate a sample statistically, the only acceptable selection method is:
A) block sample selection.
B) haphazard selection.
C) probabilistic selection.
D) judgemental selection.

Accepted Answer

When the auditor intends to evaluate a sample statistically, the only acceptable selection method is probabilistic selection. This method involves selecting a sample in a way that each item in the population has an equal chance of being selected. This ensures that the sample is representative of the population and reduces the risk of bias in the selection process. Block sample selection involves selecting items in groups, haphazard selection is not based on any formal technique and may lead to bias, and judgemental selection involves selecting items based on the auditor's judgement which can also lead to bias.

Quiz 14: Audit Sampling

The advantage of systematic sample selection is that:

The point estimate, by itself, is NOT an adequate measure of the population misstatement because of:

In audit sampling, an advance estimate of the deviation rate is necessary to plan the appropriate sample size. The relationship of estimated population deviation rate (EPDR) to sample size is:

When errors are found, a common assumption in practice is to assume:

As a result of tests of controls, an auditor assessed control risk too low and decreased substantive testing. This occurred because the true deviation rate in the population was:

Which one of the following is an advantage of systematic sample selection over random number sampling?

Which one of the following statements regarding block sampling is NOT true?

In monetary- unit sampling, the values of the estimated likely maximum misstatements are referred to as the:

If the auditor believes that there will be more than just a few exceptions discovered and desires an accurate estimate of the dollar value of the exceptions, he or she will use:

Which of the following factors is generally NOT considered in determining sample size for a test of controls?

When the computed upper deviation rate is greater than the tolerable deviation rate, it is necessary for the auditor to take specific action. Which of the following courses of action would be most difficult to defend if the auditor is ever subject to review by a court?

An advantage of using statistical sampling techniques is that such techniques:

One of the causes of non- sampling error is:

The final step in the evaluation of the audit results is the decision to:

Monetary- unit sampling is most commonly used when:

Which one of the following BEST illustrates the concept of sampling risk?

Statistical theory proves that in most types of populations to which audit sampling applies, the population size is:

A sample in which every possible combination of items in the population has an equal chance of constituting the sample is a:

The major difference between monetary- unit sampling and attributes sampling is that in MUS:

When the auditor intends to evaluate a sample statistically, the only acceptable selection method is: