Question 1

Which of the following statements is correct concerning statistical sampling in compliance testing?

Accepted Answer

The answer of Which of the following statements is correct...

Question 2

Which of the following best describes the distinguishing feature of statistical sampling?

Accepted Answer

The distinguishing feature of statistical sampling is that it provides a means for measuring mathematically the degree of uncertainty that results from examining only part of a population. Statistical sampling involves choosing a representative sample from a population and then using statistical methods to analyze the sample results in order to draw conclusions about the entire population. This provides a quantitative estimate of the level of confidence that can be placed in the conclusions drawn from the sample, based on the statistical properties of the sample and the population.

Question 3

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

Accepted Answer

The auditor incorrectly 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 underestimation of control risk.

Question 4

In determining the sample size for a test of controls, an auditor should consider the expected deviation rate, desired confidence level, and the

Accepted Answer

The tolerable deviation rate is the maximum deviation rate that the auditor is willing to accept without modifying the planned reliance on the control being tested. It is an important factor in determining the sample size because it determines the level of risk that the auditor is willing to accept. The auditor needs to balance the desired confidence level with the tolerable deviation rate to arrive at an appropriate sample size. The risk of incorrect acceptance, nature and cause of deviations, and population size are also important factors, but they are not directly used in determining the sample size formula.

Question 5

A control is deemed to be more important than thought at the time that attributes sampling parameters were set. The auditor is most likely to respond by

Accepted Answer

If a control is deemed to be more important than originally anticipated, the auditor should decrease the tolerable deviation rate to ensure that a lower level of deviations is acceptable. This will help to mitigate the increased risk associated with the more important control. Decreasing the risk of assessing control risk too high (Answer A), increasing population size (Answer B), or decreasing the expected deviation rate (Answer D) are not direct responses to a more important control.

Question 6

An auditor is testing internal control procedures that are evidenced on an entity's vouchers. To select the vouchers for testing, the auditor obtains random numbers between the first and last voucher number in the period. If a random number matches the number of a voided voucher, that voucher ordinarily should be replaced by another voucher in the random sample if the voucher

Accepted Answer

A properly voided voucher does not need to be included in the testing, as it represents a legitimate transaction that was canceled for a valid reason. Therefore, there is no need to replace it with another voucher in the sample.

Question 7

If the expected deviation rate exceeds the tolerable deviation rate, the auditor is most likely to

Accepted Answer

If the expected deviation rate exceeds the tolerable deviation rate, the auditor would set control risk at the maximum because the controls are not reliable, and thus, the auditor cannot rely on them.

Question 8

Based on a 5% risk of assessing control risk too low, how would an auditor interpret a computed upper deviation rate of 7%?

Accepted Answer

Based on a 5% risk of assessing control risk too low, the auditor is willing to accept a deviation rate of 5% or lower. Since the computed upper deviation rate is 7%, there is a 5% chance that the population deviation rate actually exceeds 7%. Therefore, the auditor cannot rely on the control as it indicates control risk is higher than initially specified.

Question 9

Auditors who prefer statistical to nonstatistical sampling believe that the principal advantage of statistical sampling flows from its unique ability to

Accepted Answer

Auditors who prefer statistical sampling believe that the principal advantage of statistical sampling flows from its unique ability to mathematically measure uncertainty. This makes it easier for auditors to quantify the reliability of their sample results and draw conclusions about the entire population.

Question 10

In attributes sampling, population size has little or no effect on sample size once the population exceeds approximately

Accepted Answer

In attributes sampling, the sample size is determined by the desired confidence level and the acceptable risk of error. Once the population exceeds approximately 500, the population size has little or no effect on the sample size.

Question 11

When testing automated IT controls, the auditor is most likely to do all of the following except:

Accepted Answer

The auditor is unlikely to increase the sample size because the tolerable deviation rate tends to be higher for automated IT controls. In fact, automated controls tend to be more reliable and consistent than manual controls, and thus a lower sample size may be sufficient. The auditor will still examine the IT software, test a few of each type of transaction, and test general controls over system and program changes.

Question 12

As a result of tests of controls, an auditor over relied on internal control and decreased substantive testing. This overreliance occurred because the true deviation rate in the population was

Accepted Answer

The auditor over relied on internal control because the true deviation rate in the population was more than the deviation rate in the auditor's sample, leading to a false sense of security about the effectiveness of the controls.

Question 13

In attributes sampling, a 10% change in which of the following factors normally will have the least effect on the size of a statistical sample?

Accepted Answer

In attributes sampling, the sample size is determined mainly by the population size. As such, a 10% change in population size will have the least effect on the size of the statistical sample. Tolerable deviation rate, expected population deviation rate, and standard deviation all play a role in determining the sample size and a 10% change in any of these factors would have a greater impact on the sample size.

Question 14

In which of the following cases would the auditor be most likely to conclude that all of the items in an account under consideration should be examined rather than tested on a sample basis?

Accepted Answer

When the tolerable deviation is small and expected deviation is high, it indicates a higher risk of misstatement, and therefore the auditor would be more likely to conclude that all items in the account should be examined rather than testing on a sample basis. This ensures a higher level of assurance in detecting any potential errors or fraud.

Question 15

If auditors conducting attributes sampling found that the entity deviated from a prescribed control in nine of the first 10 items examined, the auditor is most likely to

Accepted Answer

If auditors find a high rate of deviation early in the sampling, they are likely to stop the test and increase control risk, as the control is not functioning as intended.

Question 16

Auditors who prefer statistical sampling to nonstatistical sampling may do so because statistical sampling helps the auditor

Accepted Answer

Statistical sampling allows auditors to quantify the sufficiency of the evidential matter obtained by providing a statistical basis for measuring the sample size and evaluating the results.

Question 17

For an attributes sampling plan, the tolerable deviation rate is 4.5%, the computed upper deviation rate is 7%, the sample deviation rate is 3%, and the desired confidence level is 95%. What is the allowance for sampling risk included in the computed upper deviation rate?

Accepted Answer

The achieved allowance for sampling risk included in the computed upper deviation rate is 4% (7% - 3%).

Question 18

The computed upper deviation rate is

Accepted Answer

The computed upper deviation rate is the sum of the sample deviation rate and an appropriate allowance for sampling risk. It is used to help auditors determine whether controls are operating effectively. It provides an upper limit or maximum rate of deviations that the auditor is willing to accept before deciding not to rely on the control.

Question 19

Which of the following factors does an auditor generally need to consider in planning a particular audit sample for a test of controls?

Accepted Answer

The answer of Which of the following factors does an...

Question 20

Statistical sampling provides a technique for

Accepted Answer

Statistical sampling allows auditors to measure the sufficiency of evidential matter by using mathematical calculations to estimate characteristics of the population based on a sample. It does not eliminate judgment, and while it can reduce the amount of substantive testing needed, it does not eliminate the need for substantive testing altogether. Materiality is not exactly defined through statistical sampling.

Quiz 8: Audit Sampling: An Overview and Application to Tests of Controls