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a. Statistical risk.
b. Sampling risk.
c. The standard error of the mean.
d. Nonsampling risk.
d. Nonsampling risk.
a. Higher than the risk of assessing control risk too low for the
larger population.
b. Lower than the risk of assessing control risk too low for the
larger population.
c. The same as the risk of assessing control risk too low for the
larger population.
d. Indeterminable relative to the risk of assessing control risk too
low for the larger population.
b. Lower than the risk of assessing control risk too low for the
larger population.
As lower acceptable levels of both audit risk and materiality are
established, the auditor should plan more work on individual
accounts to
a. Discovery sampling.
b. Variables sampling.
c. Random sampling.
d. Dollar-unit sampling
a. Discovery sampling.
a. Increase.
b. Remain the same.
c. Decrease.
d. Change by 4%.
c. Decrease
a. Population size.
b. Precision (confidence interval).
c. Reliability (confidence level).
d. Standard deviation.
a. Population size.
a. Increase.
b. Remain the same.
c. Decrease.
d. Be recalculated using a binomial distribution.
c. Decrease
If the size of the sample to be used in a particular attribute test
has not been determined by utilizing statistical concepts, but the
sample has been chosen in accordance with random selection
procedures,
The major reason that the difference and ratio estimation methods
would be expected to produce audit efficiency is that the
a. Population increases.
b. Desired precision interval narrows.
c. Desired reliability decreases.
d. Expected misstatement occurrence rate increases.
c. Desired reliability decreases.
Balance determined
Accounts Balance by the auditor
Population 4,100 $5,000,000 ?
Sample 200 $ 250,000 $300,000
a. $6,150,000.
b. $6,000,000.
c. $5,125,000.
d. $5,050,000.
b. $6,000,000.
a. Sample mean.
b. Standard deviation.
c. Standard error of the sample mean.
d. Estimated population total minus the actual population total.
b. Standard deviation.
a. Increase.
b. Decrease.
c. Change by 5 percent.
d. Remain the same.
b. Decrease
a. Projected misstatement.
b. Sampling error.
c. Standard error.
d. Nonsampling error.
d. Nonsampling error.
a. Population increases.
b. Desired allowance for sampling risk decreases.
c. Desired risk of incorrect acceptance increases.
d. Expected deviation rate increases.
c. Desired risk of incorrect acceptance increases.
a. Audit sampling.
b. Statistical sampling.
c. Nonstatistical sampling.
d. None of the above.
c. Nonstatistical sampling.
a. Audit sampling.
b. Statistical sampling.
c. Nonstatistical sampling.
d. None of the above.
c. Nonstatistical sampling.
Whenever an auditor uses audit sampling all of the following
requirements apply except
a. Stop-or-go sampling.
b. Stratified mean per unit estimation.
c. Ratio estimation.
d. Probability-proportional-to-size sampling.
d. Probability-proportional-to-size sampling.
a. 1981.
b. 1963.
c. 1972.
d. None of the above.
a. 1981.
One of the most significant features of SAS No. 39 is that it, for
the first time
a. Required statistical sampling to comply with generally accepted
auditing standards in specified circumstances.
b. Equated statistical and nonstatistical sampling in a common
approach.
c. Made clear that in determining the extent of a particular audit
test an auditor could consider using statistical sampling.
d. Explained the relationship of common statistical terms to audit
concepts such as materiality and audit risk.
b. Equated statistical and nonstatistical sampling in a common
approach.
The following five questions (10 to 14) are concerned with the
following description of a sampling application: The auditor is
planning the confirmation of accounts receivable at 12/31/X7.
Accounts receivable are maintained in a tub file of unpaid sales
invoices filed by date. When a customer remits cash it is matched
to the oldest invoices first. Invoice numbers are preprinted on
remittance advices (tear-off portion of invoice mailed to the
customer). In defining population, frame and sample unit, the
auditor would most logically in the circumstances
a. Frame.
b. Population.
c. Sample unit.
d. None of the above
b. Population.
The following five questions (10 to 14) are concerned with the
following description of a sampling application: The auditor is
planning the confirmation of accounts receivable at 12/31/X7.
Accounts receivable are maintained in a tub file of unpaid sales
invoices filed by date. When a customer remits cash it is matched
to the oldest invoices first. Invoice numbers are preprinted on
remittance advices (tear-off portion of invoice mailed to the
customer). In defining population, frame and sample unit, the
auditor would most logically in the circumstances
a. Frame.
b. Population.
c. Sample unit.
d. None of the above.
c. Sample unit.
The following five questions (10 to 14) are concerned with the
following description of a sampling application: The auditor is
planning the confirmation of accounts receivable at 12/31/X7.
Accounts receivable are maintained in a tub file of unpaid sales
invoices filed by date. When a customer remits cash it is matched
to the oldest invoices first. Invoice numbers are preprinted on
remittance advices (tear-off portion of invoice mailed to the
customer). In defining population, frame and sample unit, the
auditor would most logically in the circumstances
a. Frame.
b. Population.
c. Sample unit.
d. None of the above.
d. None of the above.
The following five questions (10 to 14) are concerned with the
following description of a sampling application: The auditor is
planning the confirmation of accounts receivable at 12/31/X7.
Accounts receivable are maintained in a tub file of unpaid sales
invoices filed by date. When a customer remits cash it is matched
to the oldest invoices first. Invoice numbers are preprinted on
remittance advices (tear-off portion of invoice mailed to the
customer). In defining population, frame and sample unit, the
auditor would most logically in the circumstances
a. Frame.
b. Population.
c. Sample unit.
d. None of the above.
a. Frame.
The following five questions (10 to 14) are concerned with the
following description of a sampling application: The auditor is
planning the confirmation of accounts receivable at 12/31/X7.
Accounts receivable are maintained in a tub file of unpaid sales
invoices filed by date. When a customer remits cash it is matched
to the oldest invoices first. Invoice numbers are preprinted on
remittance advices (tear-off portion of invoice mailed to the
customer). In defining population, frame and sample unit, the
auditor would most logically in the circumstances
a. Frame.
b. Population.
c. Sample unit.
d. None of the above.
d. None of the above.
a. 20%.
b. 50%.
c. Greater but not determinable without knowing the dollar amount
of the population.
d. Less but not determinable without knowing the dollar amount of
the population.
a. 20%.
a. Stratified selection.
b. Haphazard selection.
c. Judgmental selection.
d. Simple random selection.
c. Judgmental selection.
When acceptable UPL is less than achieved UPL, the auditor may
do all of the following except
In using the text tables for fixed-sample size attribute sampling for
evaluation of sample results, the upper precision limit is found by
reading up from the number of deviations that is in the row for the
relevant
a. 50.
b. 60.
c. 80.
d. 18.
a. 50.
a. 50.
b. 60.
c. 80.
d. 29.
b. 60
a. 6%.
b. 10%.
c. 4%.
d. 11%.
d. 11%
a. 6%.
b. 10%.
c. 4%.
d. 11%.
b. 10%
a. 30.
b. 20.
c. 3.
d. Indeterminate without more data.
a. 30.
a. Audit risk.
b. Inherent risk.
c. Control risk.
d. Detection risk
b. Inherent risk.
a. Audit risk.
b. Inherent risk.
c. Control risk.
d. Detection risk
d. Detection risk
In judgmentally determining the control risk (CR), the auditor
should never allow control risk to be
a. 100%.
b. 20%.
c. 50%.
d. 5%.
d. 5%.
a. 100%.
b. 20%.
c. 50%.
d. 5%.
c. 50%.
In using the audit risk model, the auditor generally sets audit risk
at
a. 0 to 100%.
b. 50% to 100%.
c. 5% to 10%.
d. 20% to 80%.
c. 5% to 10%.
a. 20%.
b. 40%.
c. 80%.
d. 100%.
b. 40%.
a. 20%.
b. 40%.
c. 80%.
d. 100%.
a. 20%
a. Reliability.
b. Standard deviation.
c. Confidence coefficient.
d. Precision
d. Precision
a. $80,000 to $100,000.
b. $90,000 to $110,000.
c. $85,000 to $95,000.
d. $95,000 to $105,000.
b. $90,000 to $110,000.
a. Materiality.
b. Standard deviation.
c. Confidence coefficient.
d. Precision
c. Confidence coefficient.
a. 80.
b. 120.
c. 160.
d. 200
b. 120
a. 50,000.
b. 6.
c. 16,700.
d. 240.
c. 16,700
Confidence Levels
Number of Occurrences 90% 95%
0 2.4 3.0
1 3.9 4.8
2 5.4 6.3
3 6.7 7.8
a. 1,000.
b. 3,000.
c. 6,000.
d. 10,000.
b. 3,000
Confidence Levels
Number of Occurrences 90% 95%
0 2.4 3.0
1 3.9 4.8
2 5.4 6.3
3 6.7 7.8
The first addition to the basic bound for finding one misstatement
is
a. 500.
b. 900.
c. 1200.
d. 300
b. 900
Confidence Levels
Number of Occurrences 90% 95%
0 2.4 3.0
1 3.9 4.8
2 5.4 6.3
3 6.7 7.8
The second addition to the basic bound for finding a second
misstatement is
a. 1200.
b. 900.
c. 450.
d. 375.
d. 375
Confidence Levels
Number of Occurrences 90% 95%
0 2.4 3.0
1 3.9 4.8
2 5.4 6.3
3 6.7 7.8
a. 10,000.
b. 6,000.
c. 3,000.
d. 2,500
c. 3,000
An auditor has selected sample size of 100 with a specified risk of
incorrect acceptance of 5%. The account balance being sampled
is $100,000 and the auditor has found the following two
misstatements in examining sample items.
Confidence Levels
Number of Occurrences 90% 95%
0 2.4 3.0
1 3.9 4.8
2 5.4 6.3
3 6.7 7.8
a. 0.
b. 100.
c. 500.
d. 750
d. 750
a. Tolerable rate.
b. Population size.
c. Risk of assessing control risk too low.
d. Expected deviation rate.
b. Population size.
a. Precision interval.
b. Proportional allocation.
c. Point estimate.
d. Population difference.
c. Point estimate.
The statistical concept of beta risk is identical with which of the
following concepts explained in SAS No. 39:
a. Difference estimation.
b. Unstratified mean per unit estimation.
c. Ratio estimation.
d. Stratified mean per unit estimation
b. Unstratified mean per unit estimation
a. Sampling error.
b. Standard error of the mean.
c. Nonsampling error.
d. Intolerable misstatement.
c. Nonsampling error.
a. Sampling error.
b. Nonsampling error.
c. Tolerable misstatement.
d. Standard error of the mean
b. Nonsampling error.
a. Systematic selection.
b. Block selection.
c. Stratified random selection.
d. Unstratified random selection.
b. Block selection.
a. Varying reliability.
b. Adjusting the ratio of precision to materiality.
c. Rejecting book value in appropriate circumstances.
d. Varying the assessed level of control risk
b. Adjusting the ratio of precision to materiality.
a. Systematic selection.
b. Random sampling without replacement.
c. Random systematic selection.
d. Stratified selection
d. Stratified selection
In the past, the auditors have found that the book value of a
receivable account has been related to the amount the account is
misstated (i.e., large accounts have large misstatements and
small accounts have small misstatements). Which of the following
techniques is most likely to be efficient?
a. Mean-per-unit estimation.
b. Ratio estimation.
c. Difference estimation.
d. Sequential sampling estimation.
b. Ratio estimation.
a. Dollar-unit sampling.
b. Sequential sampling.
c. Probability proportional to size (PPS) sampling.
d. Variables sampling.
b. Sequential sampling.
a. precision
b. reliability
c. dispersion
d. skewness
a. precision
An auditor is designing a sampling plan to test the accuracy of
daily production reports over the past 3 years. All of the reports
contain the same information except that Friday reports also
contain weekly totals and are prepared by managers rather than
by supervisors. Production normally peaks near the end of a
month. If the auditor wants to select two reports per month using
an interval sampling plan, which of the following techniques
reduces the likelihood of bias in the sample?
A. large, low
B. small, high
C. large, high
D. small, low
B. small, high
A. Incorrect rejection
B. Incorrect acceptance
C. Assessing CR too low
D. Assessing CR too high
A. Incorrect rejection
A. $60
B. $7
C. $2.30
D. $2.00
D. $2.00
24/sqrt(144)=2
The auditors of Smith Electronics wish to limit the audit risk of
material misstatement in the test of accounts receivable to 5
percent. They believe that inherent risk is 100%, control risk is
50%, and there is a 40% risk that material misstatement could
have bypassed the client's system of internal control. What is the
maximum detection risk the auditors should specify in their
substantive procedures of details of accounts receivable?
A. 5%
B. 10%
C. 20%
D. 25%
D. 25%
0.05/(.5*.4)
Given a random start of $50 as the first dollar amount, what is the
number of the 4th voucher to be selected, assuming the sample
size will be 1000?
A. 4
B. 6
C. 7
D. 8
D. 8
T/F: The frame may contain units that do not belong to the
population as long as it is possible to select the sample from units
that do belong.
True
T/F: Valid sampling frames may contain units that don't belong to
the population as defined.
True
T/F: The standard error of the mean generally will be less than the
estimated std dev computed on the basis of a sample
True
T/F: to use PPS sampling for testing controls, the auditor denies
attributes just as he or she would when using attribute sampling
True
a) variables sampling
b) attribute sampling
c) discovery sampling
d) dollar-unit sampling
c
a) $3,000
b) $4,000
c) $6,000
d) $8,000
c
a) unstratified mean-per-unit
b) probability-proportional-to-size
c) difference estimation
d) ratio estimation
c
a) accept the sample results since the sample error rate (4%) is
less than the TER (5%)
b) reject the sample results because the CUER (10%) exceeds
the TER (5%)
c) accept the sample results because the CUER (10%) does not
exceed the ARACR (10%)
d) reject the sample results because the sample error rate (4%)
exceeds the EPER (1%)
b
In the past, the auditors have found that the book value of a
receivable account has been related to the amount the account is
misstated (i.e., large accounts have large misstatements and
small accounts have small misstatements). Which of the following
techniques is most likely to be efficient?
A. Mean-per-unit estimation.
B. Ratio estimation.
C. Difference estimation.
D. Sequential sampling estimation.
B. Ratio estimation.
The likelihood of assessing control risk too high is the risk that the
sample selected to test controls
A) Does not support the auditor's planned assessed level of
control risk when the true operating effectiveness of the control
justifies such an assessment.
B) Does support the auditor's planned assessed level of control
risk when the true operating effectiveness of the control does not
justify such an assessment.
C) Contains misstatements that could be material to the financial
statements when aggregated with misstatements in other account
balances or transaction classes.
D) Contains proportionately fewer monetary errors or deviations
from prescribed internal controls than exist in the balance or class
as a whole.
A
For which of the following audit tests would an auditor most likely
use attribute sampling?
A) Observation of employees who control mailroom receipts.
B) Examining supporting documentation for purchases for
evidence of proper authorization.
C) Examining invoices in support of the valuation of equipment
additions.
D) Selected accounts receivable for confirmation of account
balances.
B