Question 1

Match each factor of sample size to (1)its relationship to sample size (A-Direct or B-Inverse)and (2)the appropriate effect on the sample size if the factor increases (C-Increase or D-Decrease).
1.Tolerable misstatement
2.Population size
3.Desired confidence level
4.Expected misstatement

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Question 2

When auditing accounts payable using classical variables sampling,Sue finds evidence indicating that the account may be materially misstated.What are Sue's options?

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Question 3

You have been placed in charge of determining the sample size for an audit of accounts receivable.Your superior would like a confidence level of 99%.How does this affect your determination of sample size? What can you infer about the level of risk of incorrect acceptance that your superior is willing to accept?

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Question 4

Match the following

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 ...

Question 5

In nonstatistical sampling,describe the two methods auditors use to project sample results to the population.How does an auditor determine which method to use?

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Question 6

Whenever a statistical method is used,a decision rule determines whether the population is acceptable.The decision rule for monetary-unit sampling is "Accept the conclusion that the book value is not misstated by a material amount if _______________________."

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Question 7

What is one advantage and one disadvantage of classical variables sampling?

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Question 8

Describe two advantages and two disadvantages of monetary-unit sampling (MUS).

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Question 9

In a monetary-unit sample with a sampling interval of $10,000,an auditor discovered that a selected account receivable with a recorded amount of $5,000 had an audit amount of $2,000.The projected misstatement of this sample was
A) $3,000.
B) $4,000.
C) $6,000.
D) $8,000.
The misstatement amount is 60% with a taint of .60 of the book value of the selected item. The taint is applied to the sampling interval to determine the projected misstatement for the account. The projected misstatement would be $6,000 ($10,000 × .60).

Accepted Answer

The projected misstatement is calculated by applying the taint factor to the sampling interval, which in this case is $10,000 × 0.60 = $6,000. Therefore, the projected misstatement of the sample is $6,000.

Question 10

An auditor has taken a large sample from an audit population that is skewed in the sense that it contains a large number of small dollar balances.The auditor can conclude
A) the sampling distribution is not normal; therefore MUS sampling will more accurately define the nature of the population.
B) the sampling distribution is normal; therefore the confidence coefficient value can be used to evaluate the sample results.
C) the sampling distribution is not normal; thus attribute sampling is the only alternative statistical tool that can be appropriately used.
D) none of the other answers is correct.

Accepted Answer

The fact that the audit population is skewed does not necessarily imply that the sampling distribution is not normal. As such, the auditor can still use the confidence coefficient value to evaluate the sample results. Additionally, MUS and attribute sampling may not be appropriate alternatives for this scenario.

Question 11

An auditor established a $60,000 tolerable misstatement for an account balance of $1,000,000.The auditor selected a sample of every twentieth item from the population of 1,000 items that represented the asset account balance and discovered overstatements of $3,700 and understatements of $200.Under these circumstances,the auditor most likely would conclude that
A) there is an unacceptably high risk that the actual misstatements in the population exceed the tolerable misstatement because the total projected misstatement is more than the tolerable misstatement.
B) there is an unacceptably high risk that the tolerable misstatement exceeds the sum of actual overstatements and understatements.
C) the asset account is fairly stated because the total projected misstatement is less than the tolerable misstatement.
D) the asset account is fairly stated because the tolerable misstatement exceeds the net of projected actual overstatements and understatements.
Net overstatement is $3,500. Using difference projection, the mean misstatement per sampling unit is $70 ($3,500/50) and the projected misstatement is $70,000 ($70 × 1,000). The projected misstatement is larger than the tolerable (even before considering sampling risk).

Accepted Answer

The total projected misstatement of $70,000 is greater than the tolerable misstatement of $60,000, indicating that there is an unacceptably high risk that the actual misstatements in the population exceed the tolerable misstatement. This means that the auditor cannot conclude that the asset account is fairly stated without further investigation and potential adjustments.

Question 12

Summarize the concept behind monetary-unit sampling (MUS).How does MUS use attribute-sampling theory?

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Question 13

An auditor is performing substantive procedures of pricing and extension of perpetual inventory balances consisting of a large number of items.Past experience indicates numerous pricing and extension errors.Which of the following statistical sampling approaches is most appropriate?
A) Unstratified mean-per-unit.
B) Monetary-unit sampling.
C) Stop or go.
D) Difference projection.

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Quiz 9: Audit Sampling: An Application to Substantive Tests of Account Balances

Match each factor of sample size to (1)its relationship to sample size (A-Direct or B-Inverse)and (2)the appropriate effect on the sample size if the factor increases (C-Increase or D-Decrease). 1.Tolerable misstatement 2.Population size 3.Desired confidence level 4.Expected misstatement