Question 1

The method used to measure the estimated total error 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 to measure the estimated total error amount by calculating the difference between recorded and audited values for each item in the sample.

Question 2

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 3

The auditor is concerned with the audited value rather than the error 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 audited value of each item in the sample to estimate the total value of the population.

Question 4

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 5

The 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

When the cost of increasing the sample size is high, the risk of incorrect rejection becomes more significant because auditors must balance the cost against the risk of making an incorrect decision.

Question 6

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,...

Question 7

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 an incorrect rejection, also known as Type I error. This occurs when the auditor concludes that there is a material misstatement when there isn't one present. The risk of incorrect rejection occurs when the auditor sets the control risk too low, leading to an increase in the likelihood of detecting errors that are not material.

Question 8

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-unit...

Question 9

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

Accepted Answer

The sampling interval is determined by dividing the population size by the desired sample size, not the confidence factor.

Question 10

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

Accepted Answer

If the misstatement bound exceeds tolerable misstatement, it means that the errors or misstatements in the population are too large and cannot be considered acceptable. Therefore, the correct answer is B.

Question 11

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...

Question 12

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 13

When dealing with variables sampling and sampling risk, it is important to understand that:
A)for variables sampling, auditors uses ARIA but not ARIR.
B)ARIR is of serious concern to the auditor because of potential legal implications.
C)ARIA is a one-tailed statistical test.
D)the confidence coefficients for ARIA are the same as the confidence level.

Accepted Answer

The answer of When dealing with variables sampling and sampling...

Question 14

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 most commonly used with mean-per-unit estimation as it helps to ensure that each stratum is represented proportionally in the sample, leading to more accurate estimates of the population mean. However, it can also be used with difference and ratio estimation. Discovery sampling is not related to the use of stratified sampling.

Question 15

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)Variable sampling

Accepted Answer

Variable sampling is designed to estimate a numerical measurement of a population, such as a dollar value. This type of sampling is used when the attribute being measured is continuous and can take on a range of values.

Question 16

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 PPS sampling involves selecting items based on their proportional contribution to the total population. If an account has zero or negative balance at year-end, it cannot make any contribution to the total population and therefore has no chance of being included in the sample.

Question 17

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

Accepted Answer

The projected misstatement is calculated by multiplying the percentage misstatement by the recorded amount of the population. The sampling interval is used to determine the sample size and select the items to be tested.

Question 18

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 19

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 20

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.

Quiz 17: Audit Sampling for Tests of Details of Balances

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

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

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

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.

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

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

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:

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

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

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

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

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

When dealing with variables sampling and sampling risk, it is important to understand that:

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

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

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

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

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

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:

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