Question 1

The timing of audit testing refers to the stage of the audit when procedures are performed
and the date that audit evidence relates to.

Accepted Answer

The definition of timing of audit testing is accurate. It refers to both the stage of the audit when procedures are performed and the date that audit evidence relates to.

Question 2

An audit plan includes the audit procedures to be used when testing controls and when
conducting detailed substantive audit procedures.

Accepted Answer

An audit plan does include the audit procedures to be used when testing controls and conducting detailed substantive audit procedures.

Question 3

Projected error refers to the extrapolation of the errors detected when testing a sample to
the population from which the sample was drawn.

Accepted Answer

Projected error involves using the errors found in a sample to estimate the errors that may exist in the larger population from which the sample was drawn.

Question 4

Stratification of the population will result in less efficient sampling and increase the sample
size required.

Accepted Answer

Stratification, when properly applied, aims to ensure that the sample more accurately reflects the population by dividing it into distinct layers or strata. This can lead to more efficient sampling and potentially reduce the sample size needed to achieve a certain level of precision, as it minimizes variability within each stratum.

Question 5

Block selection involves the selection of items that are grouped together within the population
of items available.

Accepted Answer

Block selection is a technique used in statistics where items are grouped together into blocks or categories and a sample is selected from each block to ensure representation from each category.

Question 6

Non-sampling risk arises when an auditor

Accepted Answer

Non-sampling risk arises when the audit procedure used is not appropriate to achieve the audit objective. It is not related to the use of sampling or the extent of testing. Spending too much time on high-risk accounts may increase the effectiveness of the audit, but it does not relate to non-sampling risk.

Question 7

When conducting substantive testing, an increase in the auditor's assessment of the risk of
material misstatement will result in an increase in the size of the sample.

Accepted Answer

When the auditor assesses a higher risk of material misstatement, they need to gather more evidence to reduce the level of detection risk to an acceptable level. This means they will need to increase the size of the sample to achieve a higher level of assurance.

Question 8

Non-sampling risk is the risk that

Accepted Answer

Non-sampling risk refers to the risk of reaching an incorrect conclusion for reasons that are not related to sampling, such as errors or biases in the auditor's judgment, misinterpretation of evidence, or inadequate testing procedures. Choices A and C relate to sampling risk, which is a separate concept. Choice D is incorrect as one of the other choices is a correct response.

Question 9

Tolerable error is the minimum error an auditor is willing to accept within the population
tested.

Accepted Answer

Tolerable error is the maximum error in the population that the auditor would be willing to accept and still conclude that the audit objective has been achieved; it is not the minimum error they are willing to accept.

Question 10

Stratification is when an auditor selects a sample for testing by dividing the number of
population items by the sample size, resulting in the sampling interval.

Accepted Answer

Stratification in auditing refers to the process of dividing a population into smaller groups or strata based on certain characteristics or criteria, not the division of the number of population items by the sample size to determine a sampling interval. The description given relates more closely to systematic sampling.

Question 11

Tests of controls are audit procedures designed to detect material misstatements at the
assertion level.

Accepted Answer

Tests of controls are specifically used to determine the effectiveness of internal controls in preventing or detecting material misstatements at the assertion level.

Question 12

Sampling is not required when

Accepted Answer

Sampling is not required when an audit procedure is conducted on an entire group of transactions. This is because all of the transactions in the group are being examined, and therefore there is no need to take a sample.

Question 13

Sampling risk is the risk that the sample chosen by the auditor is not representative of the
population available for testing.

Accepted Answer

Sampling risk refers to the possibility of choosing a sample that is not reflective or representative of the entire population. This can occur due to various factors such as bias in the selection process, inadequate sample size, or errors in data collection or analysis. To reduce sampling risk, auditors typically use statistical techniques and rely on their professional judgment to ensure that the sample is appropriate and sufficient for the given audit objectives.

Question 14

Non-statistical sampling involves random selection and probability theory to evaluate the
results.

Accepted Answer

Non-statistical sampling does not involve random selection and probability theory, but rather relies on the judgment of the sampler to choose representative samples.

Question 15

Walter Polonia was explaining to his junior staff the implications of sampling risk when conducting substantive testing. He made the following two statements:
Which statements, if any, were true?

Accepted Answer

Statement (ii) is true because decreasing the acceptable level of sampling risk and increasing the planned level of substantive testing will both decrease the risk of incorrect acceptance (Type II error) and the overall audit risk. However, statement (i) is false because increasing the sample size alone will not necessarily decrease the sampling risk. The sample size needs to be determined based on factors such as the level of risk, materiality, expected error rate, and reliability of the underlying data, among others.

Question 16

The risk that the auditor concludes that a material misstatement exists when it does not is
likely to result in an increase in audit effort when it is not required.

Accepted Answer

If the auditor concludes that a material misstatement exists when it does not, they may perform additional procedures and tests to address the perceived issue, which will increase the audit effort and cost.

Question 17

When auditors conclude that an internal control is effective, they will rely on the control to
prevent and detect a material misstatement and reduce their detailed substantive procedures.

Accepted Answer

When auditors determine that an internal control is effective, they can rely on it to prevent and detect material misstatements, which reduces the need for detailed substantive procedures. This reliance on internal controls is a key component of the risk assessment process in an audit. Therefore, the statement is true.

Question 18

Sampling risk for tests of controls is when

Accepted Answer

Sampling risk for tests of controls specifically refers to the possibility that an auditor might incorrectly assess the effectiveness of internal controls. When an auditor erroneously concludes that a client's internal control system is effective when it is not, they have encountered sampling risk in the context of tests of controls.

Question 19

Sampling is required when an audit procedure is tested on an entire group of transactions or
all items within an account balance.

Accepted Answer

Sampling is not required when an audit procedure is tested on an entire group of transactions or all items within an account balance. In such cases, the auditor can perform a test of controls or a substantive test on the entire population, without the need for sampling. Sampling is typically used when the auditor cannot test the entire population due to time or cost constraints, and needs to select a representative sample that can be used to draw conclusions about the entire population.

Question 20

An increase in the number of sampling units in the population will result in a decrease in the
sample size.

Accepted Answer

An increase in the number of sampling units in the population will not necessarily result in a decrease in the sample size. In fact, it may require a larger sample size to adequately represent the increased population size.

Quiz 6: Sampling and Overview of the Risk Response Phase of the Audit

The timing of audit testing refers to the stage of the audit when procedures are performed and the date that audit evidence relates to.

An audit plan includes the audit procedures to be used when testing controls and when conducting detailed substantive audit procedures.

Projected error refers to the extrapolation of the errors detected when testing a sample to the population from which the sample was drawn.

Stratification of the population will result in less efficient sampling and increase the sample size required.

Block selection involves the selection of items that are grouped together within the population of items available.

Non-sampling risk arises when an auditor

When conducting substantive testing, an increase in the auditor's assessment of the risk of material misstatement will result in an increase in the size of the sample.

Non-sampling risk is the risk that

Tolerable error is the minimum error an auditor is willing to accept within the population tested.

Stratification is when an auditor selects a sample for testing by dividing the number of population items by the sample size, resulting in the sampling interval.

Tests of controls are audit procedures designed to detect material misstatements at the assertion level.

Sampling is not required when

Sampling risk is the risk that the sample chosen by the auditor is not representative of the population available for testing.

Non-statistical sampling involves random selection and probability theory to evaluate the results.

Walter Polonia was explaining to his junior staff the implications of sampling risk when conducting substantive testing. He made the following two statements: Which statements, if any, were true?

The risk that the auditor concludes that a material misstatement exists when it does not is likely to result in an increase in audit effort when it is not required.

When auditors conclude that an internal control is effective, they will rely on the control to prevent and detect a material misstatement and reduce their detailed substantive procedures.

Sampling risk for tests of controls is when

Sampling is required when an audit procedure is tested on an entire group of transactions or all items within an account balance.

An increase in the number of sampling units in the population will result in a decrease in the sample size.