AUDIT SAMPLING

1. Which of the following is an illustration of sampling risk?

a. Projecting the results of a sample from one population to another population.
b. Applying the wrong audit test to sample data.
c. Deciding to use a nonstatistical sampling approach rather than a statistical approach.
d. Drawing an incorrect audit conclusion from a sample.
e.
2. If an auditor concludes, based on a sample, that a client's book value is materially overstated, when in fact the
balance is fairly stated, the auditor has committed an error of:
a. incorrect rejection.
b. assessing control risk too low.
c. assessting control risk too high.
d. incorrect acceptance.
3. To estimate the balance of a client's accounts receivable file, an auditor could use any one of the following
sampling approaches except:
a. classical variables sampling.
b. attribute sampling.
c. probability-proportional-to-size sampling.
d. difference or ratio estimation.
4. Stratified sampling may be more efficient than nonstratified sampling because stratified sampling may:
a. result in a smaller sample for a given precision level.
b. be used in situation where a large number of misstatements is expected.
c. decrease the likelihood that large items in a population will be selected.
d. increase the variability within a given stratum.
5. To estimate the balance of a client's accounts receivable file, an auditor could use any one of the following
sampling approaches except:
a. classical variables sampling.
b. attribute sampling.
c. probability-proportional-to-size sampling.
d. difference or ratio estimation.
6. The failure to recognize a deviation from a control procedure in a sample is an example of:
a. control risk.
b. sampling risk.
c. inherent risk.
d. nonsampling risk.
7. An auditor's judgment regarding a statistical test of controls would include whether:
a. deviations from prescribed control procedures were within acceptable limits.
b. an account was misstated by more than a material amount.
c. more effective control procedures were available.
d. any control deviations exist in the population.
8. Risk of incorrect acceptance is:
a. a measure of risk associated with relying on controls that do not work.
b. a measure of the risk that errors will occur.
c. a measure of the risk that the auditor will conclude, based on sample results, that the account balance is
fairly stated when in fact it is materially misstated.

d. a measure of the risk of rejecting an account balance that is, in fact, fairly stated.
9. The risk of assessing control risk too low is a measure of:
a. materiality.
b. fraud.
c. audit efficiency.
d. audit effectiveness.
10. An auditor most likely would be more concerned about the audit implications of an internal control
deviation if the deviation was:
a. one of only a small number discovered in the sample.
b. not expected, based on the auditor's preliminary assessment of internal control.
c. related to the recent installation of a new information system.
d. indicative of fraud.
T/F
1. Ratio estimation is an example of nonstatistical sampling for substantive tests.
True
False
2. Understatement errors are easily accommodated in probability-proportional-to-size (PPS) sampling.
True
False
3. Probability-proportional-to-size (PPS) and difference estimation are examples of classical variables
sampling.
True
False
4. Population size bears an inverse relationship to sample size.
True
False
5. Haphazard sampling should not be used in auditing because it does not reflect sound auditor judgment.
True
False