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 because accounts with zero or negative balances have no monetary value and therefore cannot be included in a sample where selection is based on the size of the account balance.

Question 2

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

The answer of The auditor is concerned with the audited...

Question 3

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 4

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 5

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 6

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

Incorrect rejection occurs when the auditor concludes that the account is materially misstated when it is actually not misstated. This is a risk associated with performing an audit and can possibly result in unnecessary further audit procedures or even loss of client trust. The other options listed (incorrect acceptance, control risk too low, and control risk too high) do not accurately describe the situation presented in the question.

Question 7

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 8

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

Accepted Answer

This statement is true. The projected misstatement is calculated by multiplying the percentage misstatement by the sampling interval. This is a key concept in the application of MUS (Monetary Unit Sampling) in auditing.

Question 9

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.

Question 10

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 11

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

The answer of The method used to measure the estimated...

Question 12

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

The answer of The risk of incorrect rejection is important...

Question 13

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 14

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 population contains errors or discrepancies that are higher than the acceptable limit, therefore it is not considered acceptable.

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

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 17

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

Acceptable risk of incorrect rejection affects auditors' action only when they conclude that a population is not fairly stated. If the auditor decides that the population is fairly stated, they will not take any action, regardless of the acceptable risk of incorrect rejection. If the auditor concludes that the population is not fairly stated, they will need to take action to reduce the risk of incorrect rejection, such as increasing the sample size.

Question 18

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 by the confidence factor. The confidence factor is used to determine the width of the confidence interval for a given sample.

Question 19

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 20

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, which in turn improves the accuracy of the mean-per-unit estimate. While it can also be used with difference and ratio estimation, these types of estimation may not necessarily require stratification, depending on the nature of the variable being measured. Discovery sampling is not a type of estimation, but rather a type of sampling used in qualitative research.

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

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

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:

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

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:

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

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?

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 error amount in a population when there is both a recorded value and an audited value for each item in the sample is:

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