Question 1

Accounts with zero or negative year-end balances have no chance of being included in a standard probability proportional to size (PPS)sample.

Accepted Answer

This is true because in a standard PPS sample, the probability of selection is proportional to the size of the account balance, and if the balance is zero or negative, the probability of selection is also zero or negative.

Question 2

The use of monetary unit sampling is most appropriate when the auditor expects to find many errors and when a monetary result is desired.

Accepted Answer

Monetary unit sampling is most appropriate when the auditor expects few errors, as it is designed to estimate the total monetary amount of misstatements in a population, not to identify a large number of errors.

Question 3

The method used to measure the estimated total misstatement amount in a population when there is both a recorded value and an audited value for each item in the sample is
A)difference estimation.
B)mean-per-unit estimation.
C)ratio estimation.
D)monetary unit sampling.

Accepted Answer

Difference estimation is used when there is a recorded value and an audited value for each item in the sample, allowing the auditor to estimate the total misstatement in the population by analyzing the differences observed in the sample.

Question 4

The acceptable risk of incorrect rejection is important only when there is a ________ cost to increasing the sample size.
A)high
B)low
C)moderate
D)marginal

Accepted Answer

The acceptable risk of incorrect rejection is important only when there is a high cost to increasing the sample size. If the cost is low, moderate, or marginal, then increasing the sample size to decrease the risk of incorrect rejection may still be feasible and cost-effective.

Question 5

Stratified sampling is applicable to difference,mean-per-unit,and ratio estimation,but it is most commonly used with
A)ratio estimation.
B)discovery sampling.
C)difference estimation.
D)mean-per-unit estimation.

Accepted Answer

Stratified sampling is mostly preferred for mean-per-unit estimation because it ensures that each stratum (subgroup) of the population is represented in the sample proportionate to its size. This results in a more efficient and precise estimation of the population mean. While stratified sampling can also be used for difference and ratio estimation, it may not be the most suitable method in all cases. Discovery sampling is not a type of sampling, so it is not applicable here.

Question 6

MUS has the statistical simplicity of attributes sampling,yet provides a statistical result expressed as a percentage.

Accepted Answer

Monetary Unit Sampling (MUS) is primarily used for value-based auditing and does not express results as a percentage of attributes; it focuses on the monetary amounts and evaluates the risk of misstatements in financial information.

Question 7

When auditors apply MUS to a sample,the sample is selected using random sampling techniques.

Accepted Answer

The answer of When auditors apply MUS to a sample,the...

Question 8

How might auditors include negative balances when using monetary unit sampling to evaluate a population?

Accepted Answer

The answer of How might auditors include negative balances when...

Question 9

Discuss the advantages and disadvantages of monetary unit sampling over other sampling methods.

Accepted Answer

The answer of Discuss the advantages and disadvantages of monetary...

Question 10

In monetary unit sampling,the likelihood of high dollar items from the population being included in the sample is lower than the likelihood for small dollar items.

Accepted Answer

In monetary unit sampling, each dollar in the population has an equal chance of being selected, which means high dollar items have a higher likelihood of being included in the sample because they represent more individual dollars.

Question 11

Acceptable risk of incorrect rejection affects auditors' action only when they conclude that a population is
A)fairly stated.
B)acceptable.
C)not fairly stated.
D)acceptable after certain adjustments.

Accepted Answer

The acceptable risk of incorrect rejection only affects auditors' action when they conclude that a population is not fairly stated. This is because in such a case, auditors may need to increase the sample size or apply more rigorous audit procedures to reduce the risk of overlooking material misstatements. If the population is fairly stated, auditors do not need to take additional action related to the acceptable risk of incorrect rejection.

Question 12

When using MUS,the projected misstatement is the percentage misstatement times the sampling interval.

Accepted Answer

This is true. The MUS approach calculates the projected misstatement by multiplying the percentage misstatement (based on the sample) by the sampling interval (the gap between items selected for testing).

Question 13

Which of the following sampling plans would be designed to estimate a numerical measurement of a population,such as a dollar value?
A)numerical sampling
B)discovery sampling
C)attributes sampling
D)variables sampling

Accepted Answer

Variables sampling is designed to estimate numerical measurements of a population, such as dollar values. Numerical sampling is a general term that can refer to various sampling techniques, but does not necessarily imply estimation of numerical values. Discovery sampling is a non-probability sampling method used for investigative purposes, rather than estimation. Attributes sampling is typically used to estimate the proportion of a population that possesses a certain characteristic, rather than a numerical measurement.

Question 14

You are auditing Nelson and Company and determined that the sample results support a conclusion that the account is materially misstated,when in fact it was not misstated.This illustrates the risk of
A)incorrect acceptance.
B)incorrect rejection.
C)control risk too low.
D)control risk too high.

Accepted Answer

This situation describes incorrect rejection, also known as Type I error, where the auditor concludes that there is a material misstatement when there is none. Control risk too low or too high could also be contributing factors, but the specific issue described in this scenario is incorrect rejection.

Question 15

Explain why monetary unit sampling,or probability proportional to size sampling,is not useful for detecting understatements.

Accepted Answer

The answer of Explain why monetary unit sampling,or probability proportional...

Question 16

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)monetary unit sampling.
C)block sampling.
D)variables sampling.

Accepted Answer

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

Question 17

To determine the sampling interval,the population is divided by the confidence factor.

Accepted Answer

To determine the sampling interval, the population is divided by the desired sample size, not the confidence factor. The confidence level is used in determining the margin of error and sample size, but not the sampling interval.

Question 18

The auditor is concerned with the audited value rather than the misstatement amount of each item in the sample when using
A)difference estimation.
B)mean-per-unit estimation.
C)ratio estimation.
D)monetary unit sampling.

Accepted Answer

Mean-per-unit estimation focuses on the average value of items in the sample, which is then extrapolated to the entire population, making the auditor concerned with the audited value of each item rather than the specific misstatement amount.

Question 19

Explain the decision rule used in monetary unit sampling to determine whether the population is acceptable.

Accepted Answer

The answer of Explain the decision rule used in monetary...

Question 20

If the misstatement bound exceeds tolerable misstatement,the population is considered acceptable.

Accepted Answer

If the misstatement bound exceeds tolerable misstatement, the population is considered unacceptable as it means that the actual misstatement in the population may be larger than what is considered tolerable.

Quiz 17: Audit Sampling for Tests of Details of Balances

Accounts with zero or negative year-end balances have no chance of being included in a standard probability proportional to size (PPS)sample.

The use of monetary unit sampling is most appropriate when the auditor expects to find many errors and when a monetary result is desired.

The method used to measure the estimated total misstatement amount in a population when there is both a recorded value and an audited value for each item in the sample is

The acceptable risk of incorrect rejection is important only when there is a ________ cost to increasing the sample size.

Stratified sampling is applicable to difference,mean-per-unit,and ratio estimation,but it is most commonly used with

MUS has the statistical simplicity of attributes sampling,yet provides a statistical result expressed as a percentage.

When auditors apply MUS to a sample,the sample is selected using random sampling techniques.

How might auditors include negative balances when using monetary unit sampling to evaluate a population?

Discuss the advantages and disadvantages of monetary unit sampling over other sampling methods.

In monetary unit sampling,the likelihood of high dollar items from the population being included in the sample is lower than the likelihood for small dollar items.

Acceptable risk of incorrect rejection affects auditors' action only when they conclude that a population is

When using MUS,the projected misstatement is the percentage misstatement times the sampling interval.

Which of the following sampling plans would be designed to estimate a numerical measurement of a population,such as a dollar value?

You are auditing Nelson and Company and determined that the sample results support a conclusion that the account is materially misstated,when in fact it was not misstated.This illustrates the risk of

Explain why monetary unit sampling,or probability proportional to size sampling,is not useful for detecting understatements.

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

To determine the sampling interval,the population is divided by the confidence factor.

The auditor is concerned with the audited value rather than the misstatement amount of each item in the sample when using

Explain the decision rule used in monetary unit sampling to determine whether the population is acceptable.

If the misstatement bound exceeds tolerable misstatement,the population is considered acceptable.