 |
| 1 | |
Which of the following best illustrates the concept of sampling risk? |
| | A) | An auditor may select audit procedures that are not appropriate to achieve the specific objective. |
| | B) | A randomly chosen sample may not be representative of the population as a whole on the characteristic of interest. |
| | C) | An auditor may fail to recognize errors in the documents examined for the chosen sample. |
| | D) | The documents related to the chosen sample may not be available for inspection. |
|
|
|
| 2 | |
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. |
|
|
|
| 3 | |
Sample size varies indirectly with which of the following? |
| | A) | Desired level of confidence |
| | B) | Expected population deviation rate |
| | C) | Tolerable deviation rate |
| | D) | All of the above |
|
|
|
| 4 | |
For which of the following audit tests would an auditor most likely use attribute sampling? |
| | A) | Observation of employees who control mail room 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. |
|
|
|
| 5 | |
An auditor plans to examine a sample of 40 accounts payable invoices for proper approval as prescribed by the client's internal accounting control procedures. One of the invoices in the chosen sample cannot be found, and the auditor is unable to use alternative procedures to determine whether the invoice was properly approved. The auditor should: |
| | A) | Choose another invoice to replace the missing one in the sample. |
| | B) | Consider this compliance test invalid and proceed with substantive tests because internal control cannot be relied upon. |
| | C) | Treat the missing invoice as a deviation for the purpose of evaluating the sample. |
| | D) | Select a completely new random set of 40 invoices. |
|
|
|
| 6 | |
Which of the following statements is true in an attributes sampling plan where the tolerable deviation rate is 7%, the computed upper deviation rate is 6.5%, the sample deviation rate is 2%, and the risk of assessing control risk too low is 5%? |
| | A) | The auditor is likely to increase control risk because the computed upper deviation rate is less than the risk of assessing control risk too low. |
| | B) | The auditor is likely to decrease control risk because the computed upper deviation rate is less than the risk of assessing control risk too low. |
| | C) | The auditor is likely to determine that the results do not support reliance on the control because the computed upper deviation rate plus the sample deviation rate is greater than the tolerable deviation rate. |
| | D) | The auditor is likely to determine that the results do support reliance on the control because the computed upper deviation rate is less than the tolerable deviation rate. |
|
|
|
| 7 | |
As a result of sampling procedures applied as tests of controls, an auditor incorrectly assesses control risk (CR) lower than appropriate. The most likely explanation for this situation is that: |
| | A) | The deviation/failure rates of both the auditor's sample and the population exceed the tolerable deviation rate [TDR]. |
| | B) | The deviation/failure rate in the auditor's sample is less than the TDR, but the deviation/failure rate in the population exceeds the TDR. |
| | C) | The deviation/failure rate in the auditor's sample exceeds the TDR, but the deviation/failure rate in the population is less than the TDR. |
| | D) | The deviation/failure rates of both the auditor's sample and the population less than the TDR. |
|
|
|
| 8 | |
Which of the following best illustrates the components that make up the upper deviation rate [UDR]? |
| | A) | Sample deviation rate + allowance for sampling risk |
| | B) | Sample deviation rate + risk of assessing control risk too high |
| | C) | Tolerable deviation rate + allowance for sampling risk |
| | D) | Expected population deviation rate + allowance for sampling risk |
|
|
|
| 9 | |
When assessing the tolerable deviation rate (TDR), the auditor should consider that while deviations from control procedures increase the risk of material misstatements, such deviations may not necessarily result in errors. This explains why: |
| | A) | Deviations from examined control procedures at a given rate would normally be expected to result in a higher rate of dollar errors. |
| | B) | A recorded disbursement that is properly authorized may nonetheless contain a material dollar error. |
| | C) | A recorded disbursement that is not properly authorized may nonetheless be recorded properly in the cash disbursements journal. |
| | D) | Deviations would result in dollar errors in the accounting records only when they occurred in different transactions. |
|
|
|
| 10 | |
Which of the following statements is true regarding non-statistical sampling? |
| | A) | It quantifies the auditor's exposure to sampling risk. |
| | B) | Its use is required by the Public Company Accounting Oversight Board for small public company clients. |
| | C) | Sample sizes for non-statistical sampling should be comparable to statistical sampling. |
| | D) | It gives greater assurance than statistical sampling that samples are randomly selected. |
|
|
|
| 11 | |
Which of the following types of evidence is most likely to utilize sampling? |
| | A) | Scanning. |
| | B) | Confirmation. |
| | C) | Observation. |
| | D) | Analytical procedures. |
|
|
|
| 12 | |
Which of the following is true regarding technological advances and auditing? |
| | A) | A well-controlled, automated accounting system that processes routine transactions with few errors can reduce the number of times auditors need to utilize sampling techniques in an audit. |
| | B) | A well-controlled, automated accounting system that processes routine transactions with few errors can eliminate the number of times auditors need to utilize sampling techniques in an audit. |
| | C) | Powerful audit software (e.g., ACL) has eliminated the need for sampling in an audit. |
| | D) | Technology, though not there yet, will eventually eliminate the need for auditors to rely on sampling in an audit. |
|
|
|
| 13 | |
The risk of incorrect rejection is associated with: |
| | A) | Inherent risk. |
| | B) | Engagement risk. |
| | C) | Sampling risk. |
| | D) | Audit risk. |
|
|
|
| 14 | |
Which of the following types of statistical testing is likely to be used for a test of controls? |
| | A) | Monetary-unit sampling. |
| | B) | Probability-proportional-to-size sampling. |
| | C) | Attribute sampling. |
| | D) | Classical variables sampling. |
|
|
|
| 15 | |
Most of the steps for planning and carrying out a nonstatistical test of controls are the same as those for a statistical test of controls. Which of the following areas represent the differences between nonstatistical and statistical sampling as discussed in the text? |
| | A) | Defining the control deviation conditions, determining the sample size, calculating the upper deviation rate. |
| | B) | Defining the control deviation conditions, defining the sampling unit, calculating the computed upper deviation rate. |
| | C) | Determining the sample size, selecting the sample items, calculating the computed upper deviation rate. |
| | D) | Defining the sampling unit, selecting the sample items, performing the audit procedures. |
|
|
.