Question 1

The audit team is planning to examine a sample of control policies and procedures.Assume that,based on the intended degree of reliance on internal control,the audit team wishes to control the risk of overreliance to 5%.In addition,based on prior engagements,the audit team anticipates an expected deviation rate of 2%.What would be the impact of reducing the tolerable rate of deviation from 7% to 5% on the sample size?
A)Increase sample size by 181 items.
B)Decrease sample size by 181 items.
C)Increase sample size by 93 items.
D)Decrease sample size by 93 items.

Accepted Answer

Reducing the tolerable rate of deviation from 7% to 5% would require a larger sample size to maintain the same level of confidence in the results, as the margin for error is reduced.

Question 2

The AICPA has developed sample size tables for attributes sampling that specifically incorporate all of the following factors except for the:
A)Expected population deviation rate
B)Risk of overreliance
C)Tolerable rate of deviation
D)Sample rate of deviation

Accepted Answer

The AICPA sample size tables for attributes sampling incorporate the expected population deviation rate, risk of overreliance, and tolerable rate of deviation. However, the sample rate of deviation is not considered in determining sample size using these tables.

Question 3

To determine the appropriate sample size for an attributes sampling application,Williams,CPA,defined the population to be 25,000 sales invoices.Williams then assessed the risk of overreliance to be 10%,the tolerable rate of deviation to be 4%,and the expected population deviation rate to be 2.5%.Using the AICPA Sample Size tables,the appropriate sample size would be:
A)9
B)13
C)353
D)513

Accepted Answer

The sample size is determined using the AICPA Sample Size tables based on the assessed risk of overreliance, the tolerable rate of deviation, and the expected population deviation rate. Given the parameters (10% risk of overreliance, 4% tolerable rate, and 2.5% expected deviation rate), the table indicates a sample size of 353.

Question 4

When testing internal controls,which of the following statements is not true with respect to the use of nonstatistical sampling?
A)Nonstatistical sampling is permitted in the audits of both public and nonpublic entities.
B)Nonstatistical sampling does not require the use of random selection techniques.
C)When using nonstatistical sampling,auditors are required to quantify the parameters used to determine sample size.
D)Auditors are required to use professional judgment in evaluating the sample results in a nonstatistical sampling application.

Accepted Answer

Nonstatistical sampling does not require the use of quantitative data or statistical calculations to determine sample size or evaluate sample results. Instead, auditors use professional judgment based on factors such as risk, materiality, and past experience. Therefore, statement C is not true as auditors using nonstatistical sampling are not required to quantify the parameters used to determine sample size. The other statements are true.

Question 5

Which of the following is the audit team's primary objective in selecting an attributes sampling selection method?
A)To provide a high probability of selecting at least one item containing a deviation.
B)To select a sample that is representative of the population from which it is drawn.
C)To select controls applied to larger dollar transactions for examination.
D)To select controls applied to transactions that are more likely to contain deviations.

Accepted Answer

The audit team's primary objective in selecting an attributes sampling selection method is to select a sample that is representative of the population from which it is drawn. This will enable the auditor to draw conclusions about the entire population based on the sample selected. Option A is incorrect as the primary objective is not to ensure selecting at least one item with deviation, rather the objective is to select the sample that is representative of the population. Option C and D are incorrect as this is not the primary objective of selecting attributes sampling selection method.

Question 6

Which of the following is true with respect to the use of sequential sampling when used with attributes sampling?
A)Sequential sampling is normally used when expected deviations occur at a relatively low rate in the population.
B)Sequential sampling is normally used when the audit team wishes to place greater reliance on internal control.
C)Sequential sampling may provide a more efficient sample size than the use of traditional attributes sampling.
D)Sequential sampling will always provide auditors with the smallest final sample size for a given set of sampling parameters.

Accepted Answer

Sequential sampling may provide a more efficient sample size than the use of traditional attributes sampling.

Question 7

If the audit team established a tolerable rate of deviation of 5%,an expected population deviation rate of 3%,and desired to control the risk of overreliance to 5%,what sample size would be appropriate in this situation?
A)132 items.
B)195 items.
C)258 items.
D)361 items.

Accepted Answer

The answer of If the audit team established a tolerable...

Question 8

Why does the risk of overreliance have an inverse relationship with sample size?
A)As the audit team expects fewer deviations from the control policy or procedure,the audit team can appropriately examine fewer items.
B)As the audit team is less concerned with making an incorrect conclusion with respect to reliance on the client's internal control,the audit team can appropriately examine fewer items.
C)As the level of control risk increases,the audit team is placing less reliance on internal control and can appropriately examine fewer items.
D)As the audit team requires greater compliance with the control policy or procedure,the audit team must examine a greater number of items.

Accepted Answer

As the audit team becomes less concerned about making incorrect conclusions regarding the client's internal control, they can afford to examine fewer items, thus reducing the risk of overreliance.

Question 9

Williams,CPA,determined that the appropriate samples size for a test of controls related to the completeness of purchase transactions was 148 items.Using the AICPA Sample Size tables,which of the following represent assessments that could have been made by Williams to determine this sample size?
A)5% risk of overreliance,4% tolerable rate of deviation,and 1% expected population deviation rate.
B)5% risk of overreliance,7% tolerable rate of deviation,and 3.25% expected population deviation rate.
C)10% risk of overreliance,8% tolerable rate of deviation,and 2% expected population deviation rate.
D)10% risk of overreliance,15% tolerable rate of deviation,and 1.75% expected population deviation rate.

Accepted Answer

The appropriate sample size for a test of controls related to the completeness of purchase transactions was 148 items. The AICPA Sample Size tables could be used to determine this sample size.

Option A has a 1% expected population deviation rate, which is below the 3.25% tolerable rate of deviation. This suggests that the sample size could be lower than 148 items.

Option C has a 10% risk of overreliance, which is higher than the 5% risk of overreliance given. This suggests that the sample size should be higher than 148 items.

Option D has a 15% tolerable rate of deviation, which is higher than the 7% tolerable rate of deviation given. This suggests that the sample size should be lower than 148 items.

Option B has a 5% risk of overreliance, a 7% tolerable rate of deviation, and a 3.25% expected population deviation rate. These values suggest that the appropriate sample size is 148 items. Therefore, option B is the best choice.

Question 10

If the audit team established a tolerable rate of deviation of 3%,an expected population deviation rate of 2%,and desired to control the risk of overreliance to 5%,what sample size would be appropriate in this situation?
A)390 items.
B)568 items.
C)590 items.
D)846 items.

Accepted Answer

The answer of If the audit team established a tolerable...

Question 11

Which of the following statements is generally correct about the sample size in statistical sampling when testing internal controls?
A)As the population size doubles,the sample size should increase by about 67%.
B)The sample size is inversely proportional to the expected population deviation rate.
C)There is no relationship between the tolerable rate of deviation and the sample size.
D)When evaluation very large populations,the population size has little or no effect on the sample size.

Accepted Answer

In statistical sampling for internal controls, the sample size is generally not significantly affected by the population size when the population is very large. Instead, it is more influenced by factors like the tolerable deviation rate and the expected deviation rate.

Question 12

An audit team would be most likely to use attributes sampling in which of the following situations?
A)Performing analytical procedures during the planning stages of the audit.
B)Evaluating management's integrity during the client acceptance process.
C)Determining the effectiveness of the audit committee in evaluating the entity's control environment.
D)Examining purchase requisitions for proper authorization.

Accepted Answer

Attributes sampling is a statistical method used to estimate the proportion of a population that has a specific characteristic. It is commonly used in auditing to test the compliance of a population with a specific control or regulation. In this case, examining purchase requisitions for proper authorization is a situation where an audit team would use attributes sampling to test whether the proper authorization has been obtained for each purchase requisition.

Question 13

When performing attributes sampling,the appropriate AICPA Sample Size table is initially selected based on the auditors' assessment of the
A)Risk of overreliance
B)Risk of underreliance
C)Tolerable rate of deviation
D)Expected population deviation rate

Accepted Answer

The AICPA Sample Size table is selected based on the auditor's assessment of the risk of overreliance, which is the risk that the auditor will rely on a control when it is not effective.

Question 14

The audit team is planning to examine a sample of control policies and procedures.Assume that the audit team establishes a tolerable rate of deviation of 6% and,based on past audits,estimates the expected population deviation rate to be 2%.Which of the following is not true with respect to the impact of the risk of overreliance on sample size?
A)The risk of overreliance has an inverse impact on sample size.
B)The risk of overreliance should be assessed at higher levels if the audit team wishes to place lower levels of reliance on internal control.
C)If the audit team assesses the risk of overreliance at 10%,the resultant sample size would be 88 items.
D)If the audit team reduced the risk of overreliance from 10% to 5%,the resultant decrease in the sample size would be 39 items.

Accepted Answer

Reducing the risk of overreliance from 10% to 5% would actually increase the sample size, not decrease it.

Question 15

Carson,CPA,judged that his test of controls of the company's 10,000 sales transactions should be based on a risk of overreliance of 10%,a tolerable rate of deviation of 8%,and an expected population deviation rate of 3.75%.Using the AICPA Sample Size tables,which of the following modifications would not affect Carson's sample size?
A)Decrease in the risk of overreliance from 10% to 5%.
B)Increase in the tolerable rate of deviation from 8% to 10%.
C)Increase in the expected population deviation rate from 3.75% to 4%.
D)Decrease in the tolerable rate of deviation from 8% to 7%.

Accepted Answer

According to AICPA Sample Size tables, an increase in the expected population deviation rate would require an increase in the sample size. However, decreasing the risk of overreliance, increasing the tolerable rate of deviation, or decreasing the tolerable rate of deviation would all require a decrease in the sample size. Therefore, only choice C (an increase in the expected population deviation rate) would not affect Carson's sample size.

Question 16

Which of the following statements is true regarding attributes sampling?
A)Once the population reaches a certain size,population size has a limited impact on sample size.
B)Auditors should use attributes sampling to evaluate controls,regardless of the degree of reliance being placed upon the controls.
C)When determining the appropriate sample size,the audit team will specifically control its exposure to both the risk of overreliance and the risk of underreliance.
D)Tests of controls should only be applied to transactions occurring at the end of the year under audit because the audit team wants to reach a conclusion about control risk at year end.

Accepted Answer

Once the population reaches a certain size, the sample size needed for attributes sampling does not significantly increase with larger populations.

Question 17

An increase in which of the following would cause the sample size in a test of controls to decrease?
A)Expected population deviation rate
B)Risk of overreliance
C)Risk of underreliance
D)Population size

Accepted Answer

An increase in the risk of overreliance allows the auditor to accept a higher chance of relying on a control that is not effective, thus reducing the required sample size.

Question 18

The audit team is planning to examine a sample of control policies and procedures.Assume that,based on the intended degree of reliance on internal control,the audit team wishes to control the risk of overreliance to 5% and,based on past audits,estimates the expected population deviation rate to be 2%.Initially,the audit team was planning for a moderate degree of reliance on internal control and established a tolerable rate of deviation of 7%; however,it is considering increasing its reliance on internal control and reducing the tolerable rate of deviation to 4%.Which of the following is not true with respect to the impact of the reduction in the tolerable rate of deviation on sample size?
A)The reduction in the tolerable rate of deviation would result in a smaller sample size.
B)The audit team would likely not seek a reduction in the tolerable rate of deviation unless it could obtain a reduction in its substantive testing.
C)The resultant sample size assuming the reduction in the tolerable rate of deviation would be 294 items.
D)The reduction in the tolerable rate of deviation would result in the audit team examining an additional 206 items.

Accepted Answer

Reducing the tolerable rate of deviation increases the sample size needed to maintain the same level of confidence in the results, not a smaller sample size.

Question 19

The audit team is planning to examine a sample of control policies and procedures.Assume that,based on the intended degree of reliance on internal control,the audit team wishes to control the risk of overreliance to 5% and establishes a tolerable deviation rate of 8%.Based on past audits,the audit team would normally estimate the expected population deviation rate at 2%; however,because of improvements in the client's internal control,they now feel that a rate of 1.25% is appropriate.Which of the following is not true with respect to the impact of the reduction in the expected population deviation rate on sample size?
A)The reduction in the expected population deviation rate would result in a smaller sample size.
B)The audit team would likely need to have a reasonable justification for establishing a lower expected population deviation rate.
C)The resultant sample size assuming the reduction in the expected population deviation rate would be 77 items.
D)The reduction in the expected population deviation rate would result in the audit team examining 19 fewer items.

Accepted Answer

The reduction in the expected population deviation rate would result in a larger sample size, not a smaller sample size as stated in option A. This is because a lower expected population deviation rate decreases the degree of sampling risk, thereby increasing the level of assurance required from the sample.

Option B is true because a justification for the lower expected population deviation rate would be needed to ensure that the sample is properly designed and meets auditing standards.

Option D is also untrue because a reduction in the expected population deviation rate would result in the audit team examining more items, not fewer items.

Therefore, only option C is not true.

Question 20

With respect to the use of attributes sampling,in which of the following steps would nonstatistical sampling and statistical sampling differ? $$\begin{array} { c c c } 
&\text { Definingthe }& \text { Evaluating sample } \
&\text { population }& \text {  renult }\
\text { A }&\text { Yes } & \text { Yes }  \
\text { B. } &\text { Yes } & \text { No }\
\text { C. } &  \text {  No } & \text { Yes }\
\text { D. } & \text {  No } & \text { No }
\end{array}$$

Accepted Answer

The answer of With respect to the use of attributes...

Quiz 18: Attributes Sampling

The AICPA has developed sample size tables for attributes sampling that specifically incorporate all of the following factors except for the:

When testing internal controls,which of the following statements is not true with respect to the use of nonstatistical sampling?

Which of the following is the audit team's primary objective in selecting an attributes sampling selection method?

Which of the following is true with respect to the use of sequential sampling when used with attributes sampling?

If the audit team established a tolerable rate of deviation of 5%,an expected population deviation rate of 3%,and desired to control the risk of overreliance to 5%,what sample size would be appropriate in this situation?

Why does the risk of overreliance have an inverse relationship with sample size?

Williams,CPA,determined that the appropriate samples size for a test of controls related to the completeness of purchase transactions was 148 items.Using the AICPA Sample Size tables,which of the following represent assessments that could have been made by Williams to determine this sample size?

If the audit team established a tolerable rate of deviation of 3%,an expected population deviation rate of 2%,and desired to control the risk of overreliance to 5%,what sample size would be appropriate in this situation?

Which of the following statements is generally correct about the sample size in statistical sampling when testing internal controls?

An audit team would be most likely to use attributes sampling in which of the following situations?

When performing attributes sampling,the appropriate AICPA Sample Size table is initially selected based on the auditors' assessment of the

Which of the following statements is true regarding attributes sampling?

An increase in which of the following would cause the sample size in a test of controls to decrease?