TBChap 009

Chapter 09
Audit Sampling
True / False Questions
1. Stratification of the population generally results in a more efficient sampling plan.
True
False
2. Discovery sampling is equivalent to an attributes sampling plan with a specified

expected deviation rate of 0 percent.
True
False
3. Increases in the number of deviations in an attributes sample results in an increase in

the achieved upper deviation rate of the attributes sample.
True
False
4. The definition of a "deviation" for a test of a control should include only those
deviations that result in misstatements in the financial statements.
True
False
5. Statistical sampling cannot be used to test all control activities.

True
False
6. Using ratio and difference estimation for a sample is an example of a dual purpose
test.
True
False
7. Increases in the tolerable misstatement result in a decreased sample size when using
mean-per-unit estimation.
True
False
8. The mean book value of the items included in a mean-per-unit sample is not directly
used in the evaluation of sample results.
True
False
9. When evaluating the results of a variables sampling plan, the projected misstatement
is calculated and compared to the tolerable misstatement.
True
False
9-1
Copyright 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
10. Auditors project the misstatements found in the sample to the population when using
statistical sampling, but not when using nonstatistical sampling.
True
False
Multiple Choice Questions

The 10,000 accounts receivable of DEF Company have a total book value of
$120,000. A CPA has selected and audited a sample of 100 accounts with a total
book value of $1,000 and an audited value of $1,200.
11. Using the difference estimation technique, estimated total audited value of the
population is:
A.
B.
C.
D.
$100,000.
$120,000.
$140,000.
$144,000.
12. Using the ratio estimation technique, the estimated total audited value of the
population is:
A.
B.
C.
D.
$100,000.
$120,000.
$140,000.
$144,000.
13. Using the mean-per-unit estimation technique, the estimated total audited value of
the population is:
A.
B.
C.
D.
$100,000.
$120,000.
$140,000.
$144,000.
14. Using the mean-per-unit estimation method an auditor has properly calculated the
estimated total audited value of a population as $200,000. Her sample included 200
of the population's 40,000 items. She found that, in her sample the average audited
value was $1 less than the average book value. What was the average audited value
in the sample?
A.
B.
C.
D.
$4.
$5.
$6.
$10.
9-2
15. Using difference estimation, an auditor has taken a sample of 200 from a
population's 40,000 items; that population has a book value of $200,000. She found
that in her sample the average audited value was $4.20, while the average book
value was $5.20. What is the estimated total audited value of the population?
A.
B.
C.
D.
$160,000.
$161,538.
$168,000.
$200,000.
16. Using ratio estimation, an auditor has taken a sample of 200 from a population's
40,000 items; that population has a book value of $200,000. She found that in her
sample the average audited value was $4.20, while the average book value was
$5.20. What is the estimated total audited value of the population?
A.
B.
C.
D.
$160,000.
$161,538.
$168,000.
$200,000.
17. Using mean-per-unit estimation, an auditor has taken a sample of 200 from a
population's 40,000 items; that population has a book value of $200,000. She found
that in her sample the average audited value was $4.20, while the average book
value was $5.20. What is the estimated total audited value of the population?
A.
B.
C.
D.
$160,000.
$161,538.
$168,000.
$200,000.
18. If the projected misstatement in a nonstatistical sampling is $8,000, while the

tolerable misstatement is $9,000, what would an auditor likely conclude?
A. Since the projected misstatement is less than the tolerable misstatement, the
account is not misstated.
B. Since the projected misstatement is less than the tolerable misstatement, the
account is misstated.
C. The risk is high that the account is materially misstated.
D. The analysis has been improperly performed since the projected misstatement is
unequal to the tolerable misstatement.
19. A dual purpose test simultaneously:
A.
Addresses two different accounts.
B. Functions as a substantive test and as a test of controls.
C. Functions as an analytical procedure and a substantive test.
D. Substantiates an ending balance and the transactions making up the balance.
9-3
The 1,000 accounts receivable of Winco Company have a total book value of $20,000
(Average book value = $20). Bob Duffo, CPA, has selected and audited a sample of
50 accounts with the following mean values:
1. Book value of $19.00
2. Audited value of $19.60.
20. What is the estimated total audited value using mean-per-unit sampling?
A.
B.
C.
D.
$19,000.
$19,600.
$20,000.
$20,632.
21. What is the estimated total audited value using difference estimation sampling?
A.
B.
C.
D.
$19,387.
$19,400.
$19,600.
$20,600.
22. If all other factors specified in an attributes sampling plan remain constant,
decreasing the tolerable rate and decreasing the risk of assessing control risk too low
would have what effect on sample size?
A.
B.
C.
D.
Increase.
Remain the same.
Decrease.
Indeterminate, depends upon exact change being made.
23. If all other factors specified in an attributes sampling plan remain constant,
decreasing the tolerable rate and increasing the estimated population deviation rate
would have what effect on sample size?
A.
B.
C.
D.
Increase.
Remain the same.
Decrease.
24. An increase in the tolerable misstatement has what effect on the planned allowance
for sampling risk?
A.
B.
C.
D.
Increases.
Decreases.
No effect.
Indeterminate.
9-4
25. Which of the following is not generally used for selecting samples?
A.
B.
C.
D.
Random number tables.

Random number generators.
Physical representation numbers.
Systematic selection.
26. In performing a test of a control last year the auditors specified a tolerable deviation
rate of X percent. This year the auditors have specified a tolerable rate of less than X
percent. Assuming that all other factors remain the same, which of the following is
true regarding the relationship between this year's sample size compared to last
year's sample size?
A. This year's sample is larger than last year's sample.
B. This year's sample is smaller than last year's sample.
C. This year's sample is equal to last year's sample.
D. This year's sample is indeterminate in relation to last year's sample.
27. The auditor using nonstatistical attributes sampling, but who nevertheless has
chosen the sample in conformity with random selection procedures:
A. Need not consider the risk of assessing control risk too low.
B.
Has committed a nonsampling error.
C. Will have to use discovery sampling techniques to evaluate the results.
D. Should compare the deviation rate of the sample to the tolerable rate.
28. When performing tests of controls over authorization of cash receipts, which of the
following sampling methods would be most appropriate?
A.
B.
C.
D.
Attributes.
Ratio.
Stratified.
Variables.
29. Which of the following statistical sampling techniques involves taking samples in a
series of stages?
A.
B.
C.
D.
Systematic sampling.
Sequential sampling.
Continuous sampling.
Multiple location sampling.
9-5
30. Which of the following is generally not true about statistical sampling as compared to
nonstatistical sampling?
A.
B.
C.
D.
Statistical samples are more representative of the population.

Statistical sample plans involve additional costs of evaluation.
Statistical sampling allows a more objective evaluation of sample results.
Statistical sampling may assist the auditors in designing more efficient samples.
31. When using statistical sampling, which of the following need not be known to
evaluate the results of an attributes sample?
A.
B.
C.
D.
Sample size.
Risk of assessing control risk too low.
Number of deviations in the population.
Number of deviations found in the sample.
32. When the auditors have decided to use statistical rather than nonstatistical sampling,
a disadvantage is that:
A.
B.
C.
D.
Designing efficient samples is more difficult.

The costs of training staff may be higher.
Sampling without replacement must be used.
Objectively evaluating results is impossible.
33. Changing from a sampling plan using random selection with replacement to random
selection without replacement has what effect on the required sample size?
A.
B.
C.
D.
Increases.
Decreases.
No effect.
An indeterminate effect.
34. When the auditors have chosen to test a control, what relationship will the tolerable
rate normally have when compared to the expected rate of deviations in the sample?
A.
B.
C.
D.
Exceed.
Equal.
Be less than.
Indefinite.
9-6
35. Increases in the planned allowance for sampling risk have what effect on required
sample size?
A.
B.
C.
D.
Increases.
Decreases.
No effect.
Indeterminate.
36. When using sampling for tests of controls, which of the following audit consequences
may follow?
A. If sample results indicate that the control is operating effectively, but in fact it is
not, control risk will be assessed too low.
B. If sample results indicate that the control is operating effectively, but in fact it is
not, control risk will be assessed too high.
C. If sample results indicate that the control is not operating effectively, but in fact it
is operating effectively, the audit is likely to be faulty because of reduced
substantive tests.
D. If sample results indicate that the control is not operating effectively, but in fact it
is operating effectively, control risk will be assessed too low.
37. The auditors expect a population deviation rate of billing errors of two percent, and
have established a tolerable rate of five percent. The sampling approach most likely
to be used is:
A.
Attributes sampling.
B.
Stratified sequential sampling.
C.
Discovery sampling.
D. None, as sampling does not seem appropriate in this situation.
38. The auditors expect a population deviation rate of billing errors of eight percent, and
have established a tolerable rate of five percent. The sampling approach most likely
to be used is:
A.
B.
Stratified random sampling.
C.
Variables sampling.
D. None, as sampling does not seem appropriate in this situation.
39. Which of the following may be used to reduce the risk of nonsampling errors?
A.
B.
C.
D.
Increasing the size of audit samples.

Stratifying audit samples.
Adequately planning audit samples.
Using statistical sampling techniques.
9-7
40. Which of the following types of risk is of critical importance to auditors in performing
tests of controls?
A.
B.
C.
D.
The risk of assessing control risk too low.

The risk of assessing control risk too high.
The risk of incorrect acceptance.
The risk of incorrect rejection.
41. The auditors' failure to recognize a misstatement in an amount or a deviation in an

internal control data processing procedure is described as a:
A.
B.
C.
D.
Statistical error.
Sampling misstatement.
Standard error of the mean.
Nonsampling error.
42. What effect does obtaining a sample with a standard deviation larger than that
estimated during planning have on the adjusted allowance for sampling risk?
A.
B.
C.
D.
Increases.
Decreases.
No effect.
Indeterminate.
The 2,000 accounts receivable of ABC Company have a total book value of $40,000.
Bob Rotter, CPA, has selected and audited a sample of 100 accounts with a total book
value of $1,950. The audited value of the 100 accounts in the sample is $1,875.
43. Using the mean-per-unit estimation technique, Rotter's estimate (to the nearest
dollar) of year-end accounts receivable balance would be:
A.
B.
C.
D.
$37,500
$38,462
$38,500
$41,600
44. Using the ratio estimation technique, Rotter's estimate (to the nearest dollar) of yearend accounts receivable balance would be:
A.
B.
C.
D.
$37,500
$38,462
$38,500
$41,600
9-8
45. Using the difference estimation technique, Rotter's estimate (to the nearest dollar) of
year-end accounts receivable balance would be:
A.
B.
C.
D.
$37,500
$38,462
$38,500
$41,600
46. The 3,000 accounts receivable of DEF Company have a total book value of $60,000.
Bob Smith, CPA, has selected and audited a sample of 100 accounts with a total book
value of $2,100. Using the difference estimation technique, Smith has properly
estimated a projected misstatement of an overstatement of $6,000 for the entire
population. The audited value of Smith's sample is:
A.
B.
C.
D.
$1,700
$1,800
$1,900
$2,300
47. The 3,000 accounts receivable of DEF Company have a total book value of $60,000.
value of $2,100. Using the difference estimation technique, Smith has properly
estimated a projected misstatement of a $9,000 overstatement for the entire
population. The estimated total audited value of the population is:
A.
B.
C.
D.
$51,000
$58,000
$60,000
$69,000
48. The 4,000 accounts receivable of GHI Company have a total book value of $60,000.
value of $1,600. Using the mean-per-unit estimation technique, Smith has properly
estimated a projected misstatement of a $8,000 overstatement for the entire
population. The audited value of Smith's sample is:
A.
B.
C.
D.
$1,300
$1,400
$1,600
$1,800
9-9
49. Which of the following is a correct statement with respect to evaluating results when
using nonstatistical sampling for substantive tests?
A. When the projected misstatement exceeds the tolerable misstatement, the auditor
should conclude that the population is not misstated.
B. The closer the projected misstatement is to the tolerable misstatement, the higher
the risk of material misstatement.
C. When the projected misstatement is equal to zero, the auditors may conclude with
certainty that no misstatements exist in the account.
D. When the projected misstatement percentage exceeds the risk of incorrect
acceptance the auditors will generally conclude that the population is materially
misstated.
50. Assume a mean-per-unit estimation variables sampling application with a tolerable
misstatement of $70,000 and a book value of $700,000. After performing the
sampling plan, the auditors calculated an adjusted allowance for sampling risk of
$45,000 and a point estimate of the population's total audited value to be $650,000.
Based on these results, the auditor would:
A. Because the tolerable misstatement exceeds the adjusted allowance for sampling
risk, conclude that the population does not contain a material misstatement.
B. Because the total audited value tolerable misstatement includes the book value,
conclude that the population does not contain a material misstatement.
C. Because the tolerable misstatement exceeds the adjusted allowance for sampling
risk, conclude that there is too great a risk that the account balance is materially
misstated.
D. Because the total audited value adjusted allowance for sampling risk does not
include the book value, conclude that there is too great a risk that the account
balance is materially misstated.
51. Assume a mean-per-unit estimation variables sampling application with a tolerable
$45,000 and a point estimate of the population's total audited value to be $640,000.
The projected misstatement based on this sample is:
A.
B.
C.
D.
$5,000
$45,000
$60,000
$70,000
9-10
52. The auditors have audited a sample with a standard deviation of audited values
larger than they had originally estimated. In this situation, to maintain the risk of
incorrect acceptance at its predetermined level without increasing the size of the
sample, which of the following statements is correct?
A. The adjusted allowance for sampling risk will be smaller than had been planned.
B. The adjusted allowance for sampling risk will be larger than had been planned.
C. The risk of incorrect rejection will necessarily decrease.
D. The size of the population must be decreased.
53. 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.
B.
C.
D.
Mean-per-unit estimation.
Ratio estimation.
Difference estimation.
Sequential sampling estimation.
54. Which of the following statements is correct concerning the use of nonstatistical
sampling for substantive tests?
A. Its use is generally acceptable only for populations with an immaterial book value.
B. It requires the use of structured sample size selection techniques to be acceptable.
C. It may be especially useful in circumstances in which the combination of inherent
and control risk is at the maximum level.
D.
Results will be projected to the population.
55. Which of the following situations will result in the auditors concluding that the risk of
material misstatement is too high when using nonstatistical sampling for substantive
tests?
A.
B.
C.
D.
The projected misstatement exceeds the tolerable misstatement.

The allowance for sampling risk exceeds the projected misstatement.
The risk of incorrect acceptance exceeds the risk of incorrect rejection.
The tolerable misstatement exceeds the sample net misstatement.
56. During the final planning of the accounts receivable plan a CPA specified a tolerable
misstatement of $30,000, instead of the $20,000 contained in the preliminary audit
plan. What would be the impact of this change?
A.
B.
C.
D.
A decrease in population standard deviation.

An increase in sample standard deviation.
An increase in required sample size.
A decrease in the required sample size.
9-11
57. Which of the following is an advantage of systematic selection over random number
selection?
A. It provides a stronger basis for statistical conclusions.
B. It enables the auditor to use the more efficient "sampling with replacement"
tables.
C. There may be correlation between the location of items in the population, the
feature of sampling interest, and the sampling interval.
D. It does not require establishment of correspondence between random numbers
and items in the population.
58. Statistical sampling generally may be applied to test internal control when the
client's internal control procedures:
A.
B.
C.
D.
Depend primarily on appropriate segregation of duties.

Are carefully reduced to writing and are included in client accounting manuals.
Leave an audit trail in the form of evidence of compliance.
Enable the detection of material fraud in the accounting records.
59. Which of the following statements is correct about the sample size in statistical
sampling when testing internal controls?
A. The auditor should consider the tolerable rate of deviation from the controls being
tested in determining sample size.
B. As the likely rate of deviation decreases, the auditor should increase the planned
sample size.
C. The allowable risk of assessing control risk too low has no effect on the planned
sample size.
D. Of all the factors to be considered, the population size has the greatest effect on
the sample size.
60. To determine sample size in an attribute sampling application, what must be
specified?
A. Population mean, expected error rate, allowance for sampling risk.
B. Allowance for sampling risk, risk of assessing control risk too low, standard
deviation.
C. Allowance for sampling risk, risk of assessing control risk too low, expected
deviation rate.
D. Population mean, standard deviation, allowance for sampling risk.
9-12
61. The tolerable deviation rate in sampling for tests of controls is:
A. Used to determine the probability of the auditor's conclusion based upon reliance
factors.
B. The probability that the financial statements are not materially in error.
C. A measure of the reliability of substantive tests.
D. The rate the auditor will tolerate without modifying the planned assessment of
control risk.
62. In testing accounts receivable, an auditor sends out positive confirmation requests to
100 randomly selected customers. A customer returns the confirmation indicating
that the balance is correct when, in fact, the balance is overstated. This is an
example of:
A.
B.
C.
D.
Projected misstatement.
Sampling error.
Standard error.
Nonsampling error.
63. An auditor wishes to estimate inventory shrinkage by weighing a sample of inventory

items. From experience, the auditor knows that a few specific items are subject to
unusually large amounts of shrinkage. In using statistical sampling, the auditor's best
course of action is to:
A. Eliminate any of the items known to be subject to unusually large amounts of
shrinkage.
B. Increase the sample size to lessen the effect of the items subject to unusually large
amounts of shrinkage.
C. Stratify the inventory population so that items subject to unusually large amounts
of shrinkage are reviewed separately.
D. Continue to draw new samples until a sample is drawn which includes none of the
items known to be subject to large amounts of shrinkage.
64. If all other factors specified in an attributes sampling plan remain constant, changing
the specified tolerable rate from 6% to 10%, and changing the specified risk of
assessing control risk too low from 3% to 7% would cause the required sample size
to:
A.
B.
C.
D.
Increase.
Remain the same.
Decrease.
Change by 4%.
9-13
65. Which of the following factors does an auditor need to consider in planning a
particular audit sample for a test of control?
A.
B.
C.
D.
Number of items in the population.

Total dollar amount of the items to be sampled.
Acceptable level of risk of assessing control risk too low.
Tolerable misstatement.
66. When using a statistical sampling plan, the auditors would probably require a smaller
sample if the:
A.
B.
C.
D.
Population increases.
Desired allowance for sampling risk decreases.
Desired risk of incorrect acceptance increases.
Expected deviation rate increases.
67. Which of the following statements is correct concerning statistical sampling in tests
of controls?
A. The population size has little effect on determining sample size except for very
small populations.
B. The expected population deviation rate has little or no effect on determining
sample size except for very small populations.
C. As the population size doubles, the sample size also should double.
D. For a given tolerable rate, a larger sample size should be selected as the expected
population deviation rate decreases.
68. An advantage of using statistical sampling techniques is that such techniques:
A.
Mathematically measure risk.
B.
Eliminate the need for judgmental decisions.
C. Define the values of allowance for sampling risk and tolerable misstatement
required to provide audit satisfaction.
D. Have been established in the courts to be superior to judgmental sampling.
69. In assessing sampling risk, the risk of incorrect rejection and the risk of assessing
control risk too high relate to the:
A.
B.
C.
D.
Efficiency of the audit.

Effectiveness of the audit.
Selection of the sample.
Audit quality controls.
9-14
70. When performing a test of a control over cash disbursements, a CPA may use a
systematic sampling technique with a start at any randomly selected item. The
biggest disadvantage of this type of sampling is that the items in the population:
A. Must be recorded in a systematic pattern before the sample can be drawn.
B. May occur in a systematic pattern and destroy the sample randomness.
C. May systematically occur more than once in the sample.
D. Must be systematically replaced in the population after sampling.
71. While performing a substantive test of details during an audit, the auditor determined
that the sample results supported the conclusion that the recorded account balance
was materially misstated. It was, in fact, not materially misstated. This situation
illustrates the risk of:
A.
B.
C.
D.
Incorrect acceptance.
Incorrect rejection.
Assessing control risk too high.
Assessing control risk too low.
72. An auditor plans to examine a sample of 20 checks for counter signatures as

prescribed by the client's control procedures. One of the checks in the chosen sample
of 20 cannot be found. The auditor should consider the reasons for this limitation
and:
A. Evaluate the results as if the sample size had been 19.
B. Treat the missing check as a deviation for the purpose of evaluating the sample.
C. Treat the missing check in the same manner as the majority of the other 19
checks, i.e., countersigned or not.
D. Choose another check to replace the missing check in the sample.
73. There are many kinds of statistical estimates that an auditor may find useful, but
basically every statistical estimate in auditing is of either a quantity or of an error
rate. The statistical terms that roughly correspond to "quantities" and "occurrence
rate," respectively, are:
A.
B.
C.
D.
Attributes and variable.

Variables and attributes.
Constants and attributes.
Constants and variables.
9-15
74. Which of the following best illustrates the concept of sampling risk?
A. A randomly chosen sample may not be representative of the population as a whole
on the characteristic of interest.
B. An auditor may select audit procedures that are not appropriate to achieve the
specific objective.
C. An auditor may fail to recognize deviations in the documents examined for the
chosen sample.
D. The documents related to the chosen sample may not be available for inspection.
75. Which of the following statistical selection techniques is least desirable for use by an
auditor?
A.
B.
C.
D.
Stratified selection.
Block selection.
Sequential selection.
76. Various factors influence the sample size for a substantive test of details of an
account balance. All other factors being equal, which of the following would lead to a
larger sample size?
A.
B.
C.
D.
Lower assessment of control risk.

Greater reliance on analytical procedures.
Smaller expected frequency of misstatements.
Smaller measure of tolerable misstatement.
77. An important statistic to consider when using a statistical sampling audit plan is the
population variability. The population variability is measured by the:
A.
Sample mean.
B.
Standard deviation.
C.
Standard error of the sample mean.
D. Estimated population total minus the actual population total.
78. In variables estimation sampling, the sample standard deviation is used to calculate
the:
A.
B.
C.
D.
Point estimate of central tendency.

Tainting of the sample interval.
Risk of incorrect acceptance.
Adjusted allowance for sampling risk.
9-16
79. Use of the ratio estimation sampling technique to estimate dollar amounts is
inappropriate when:
A. The total book value is known and corresponds to the sum of all the individual
book values.
B. A book value for each sample item is unknown.
C. There are some observed differences between audited values and book values.
D. The audited values are nearly proportional to the book value.
Essay Questions
80. Auditors have a variety of sampling approaches available. For each approach in the
first column, identify the correct statement in the second column. Each statement
may be used once, more than once, or not at all.
Approach
Statement
A.
1.
A classical method that uses both the audited and book values o
an estimated total audited value.
B.
Difference estimation sampling.
2.
A classical variables sampling plan enabling the auditors to estim

other variable) of items in a population by determining the avera
C.
Discovery sampling.
3.
A classical method that uses the audited values of all population

total audited value.
D.
Mean-per-unit estimation sampling.
4.
A method that is most effective in circumstances in which audito

occurrence of some critical deviation (e.g., a fraudulent cash disb
E.
Probability-proportional-to-size
sampling.
5. A method that defines the sampling unit as each individual dollar
F.
Ratio estimation sampling.
6.
A method that sums the allowance for sampling risk and the sam
estimated total audited value.
7. A method that relies upon decreasing the tolerable misstatemen
8. The most frequently used general method that arrives at an estim
9-17
81. Audit sampling is used in conjunction with many audit tests, and may be performed
on a statistical or nonstatistical basis.
a. Define the term audit sampling.
b. List and explain two advantages of the use of statistical sampling as compared to
nonstatistical sampling.
82. Teal Corporation has 2,000 accounts receivable, with a total book value of $200,000.
Ricardo Ramaro, CPA, has selected and audited a sample of 100 of the accounts with
a combined book value of $10,100; the total of the audited values was $11,000.
Using the mean-per-unit method, calculate the:
a. Accounts receivable estimated audited value.
b. Projected misstatement.
9-18
83. The auditors are using mean-per-unit sampling to evaluate the reasonableness of the
book value of the accounts receivable of Smith, Inc. Smith has 10,000 receivable
accounts with a total book value of $800,000. The auditors estimate the population's
standard deviation as being equal to $25. After examining the overall audit plan, the
auditors believe that the account's tolerable misstatement is $40,000, and that a risk
of incorrect rejection of .10 (risk coefficient = 1.64) and a risk of incorrect acceptance
of .15 (risk coefficient = 1.04) should be used.
Required:
a. Calculate the required sample size.
Now ignore your sample size calculation in part "a," and assume that your answer
was a sample size of 289 (the square root of 289 is 17) and that you obtained the
following results:
Average audited value of items in sample: $76
Average book value of items in sample: $78
Standard Deviation in the sample (audited values): $24
Standard Deviation in the sample (book values): $26
b. Using mean-per-unit sampling, calculate the projected misstatement for the
population.
c. Using mean-per-unit sampling, calculate the adjusted allowance for sampling risk
and use it to form a statistical conclusion concerning the book value of the population
($800,000). That is, calculate an interval and either "accept" or "reject" the client's
book value.
9-19
Chapter 09 Audit Sampling Answer Key

True / False Questions
1.
Stratification of the population generally results in a more efficient sampling plan.

TRUE
AACSB: Analytical Thinking
AACSB: Technology
AICPA: BB Industry
AICPA: BB Leveraging Technology
AICPA: FN Decision Making
AICPA: FN Leveraging Technology
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 09-02 Describe the methods of selecting a representative sample.
Topic: Statistical and Nonstatistical Sampling
2.
Discovery sampling is equivalent to an attributes sampling plan with a specified

expected deviation rate of 0 percent.
TRUE
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
Learning Objective: 09-03 Understand the different types of sampling plans used in auditing.
3.
Increases in the number of deviations in an attributes sample results in an

increase in the achieved upper deviation rate of the attributes sample.
TRUE
AACSB: Technology
AICPA: BB Industry
AICPA: FN Measurement
Blooms: Understand
Learning Objective: 09-05 Plan, perform, and evaluate samples for tests of controls using statistical and
nonstatistical methods.
Topic: Attributes Sampling
9-20
4.
The definition of a "deviation" for a test of a control should include only those
deviations that result in misstatements in the financial statements.
FALSE
AACSB: Technology
AICPA: BB Industry
Blooms: Apply
Difficulty: 3 Hard
5.
Statistical sampling cannot be used to test all control activities.

TRUE
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
Topic: Audit Sampling for Tests of Controls
6.
Using ratio and difference estimation for a sample is an example of a dual purpose
test.
FALSE
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
Learning Objective: 09-07 Describe the difference and ratio methods of estimation.
Topic: Classical Variables Sampling
7.
Increases in the tolerable misstatement result in a decreased sample size when

using mean-per-unit estimation.
TRUE
AACSB: Technology
AICPA: BB Industry
9-21

Blooms: Understand
Learning Objective: 09-06 Plan, perform, and evaluate samples for substantive procedures using mean-per-unit
sampling.
8.
The mean book value of the items included in a mean-per-unit sample is not
directly used in the evaluation of sample results.
TRUE

AACSB: Technology
AICPA: BB Industry
Blooms: Apply
Difficulty: 3 Hard
sampling.
9.
When evaluating the results of a variables sampling plan, the projected

misstatement is calculated and compared to the tolerable misstatement.
TRUE

AACSB: Technology
AICPA: BB Industry
Blooms: Remember
Difficulty: 1 Easy
sampling.
10.
Auditors project the misstatements found in the sample to the population when
using statistical sampling, but not when using nonstatistical sampling.
FALSE
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
Learning Objective: 09-01 Distinguish between statistical and nonstatistical sampling.
9-22
Multiple Choice Questions
11.
$120,000. A CPA has selected and audited a sample of 100 accounts with a total
book value of $1,000 and an audited value of $1,200.
Using the difference estimation technique, estimated total audited value of the
population is:
A.
B.
C.
D.
$100,000.
$120,000.
$140,000.
$144,000.
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
12.
Using the ratio estimation technique, the estimated total audited value of the
population is:
A.
B.
C.
D.
$100,000.
$120,000.
$140,000.
$144,000.
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
13.
Using the mean-per-unit estimation technique, the estimated total audited value
of the population is:
A.
B.
C.
D.
$100,000.
$120,000.
$140,000.
$144,000.
9-23
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
sampling.
14.
Using the mean-per-unit estimation method an auditor has properly calculated

the estimated total audited value of a population as $200,000. Her sample
included 200 of the population's 40,000 items. She found that, in her sample the
average audited value was $1 less than the average book value. What was the
average audited value in the sample?
A.
B.
C.
D.
$4.
$5.
$6.
$10.

AACSB: Technology
AICPA: BB Industry
Blooms: Apply
Difficulty: 3 Hard
sampling.
15.
Using difference estimation, an auditor has taken a sample of 200 from a

population's 40,000 items; that population has a book value of $200,000. She
found that in her sample the average audited value was $4.20, while the average
book value was $5.20. What is the estimated total audited value of the population?
A.
B.
C.
D.
$160,000.
$161,538.
$168,000.
$200,000.
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
9-24
16.
Using ratio estimation, an auditor has taken a sample of 200 from a population's
40,000 items; that population has a book value of $200,000. She found that in her
sample the average audited value was $4.20, while the average book value was
$5.20. What is the estimated total audited value of the population?
A.
B.
C.
D.
$160,000.
$161,538.
$168,000.
$200,000.
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
17.
Using mean-per-unit estimation, an auditor has taken a sample of 200 from a

population's 40,000 items; that population has a book value of $200,000. She
found that in her sample the average audited value was $4.20, while the average
book value was $5.20. What is the estimated total audited value of the population?
A.
B.
C.
D.
$160,000.
$161,538.
$168,000.
$200,000.

AACSB: Technology
AICPA: BB Industry
Blooms: Understand
sampling.
9-25
18.
If the projected misstatement in a nonstatistical sampling is $8,000, while the

tolerable misstatement is $9,000, what would an auditor likely conclude?
A. Since the projected misstatement is less than the tolerable misstatement, the
account is not misstated.
B. Since the projected misstatement is less than the tolerable misstatement, the
account is misstated.
C. The risk is high that the account is materially misstated.
D. The analysis has been improperly performed since the projected misstatement
is unequal to the tolerable misstatement.

AACSB: Technology
AICPA: BB Industry
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 09-08 Plan, perform, and evaluate samples for substantive procedures using nonstatistical
methods.
Topic: Nonstatistical Sampling for Substantive Procedures
19.
A dual purpose test simultaneously:

A.
Addresses two different accounts.
B. Functions as a substantive test and as a test of controls.
C. Functions as an analytical procedure and a substantive test.
D. Substantiates an ending balance and the transactions making up the balance.
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
9-26
The 1,000 accounts receivable of Winco Company have a total book value of
$20,000 (Average book value = $20). Bob Duffo, CPA, has selected and audited a
sample of 50 accounts with the following mean values:
20.
1. Book value of $19.00

2. Audited value of $19.60.
What is the estimated total audited value using mean-per-unit sampling?
A.
B.
C.
D.
$19,000.
$19,600.
$20,000.
$20,632.

AACSB: Technology
AICPA: BB Industry
Blooms: Understand
sampling.
21.
What is the estimated total audited value using difference estimation sampling?
A.
B.
C.
D.
$19,387.
$19,400.
$19,600.
$20,600.
AACSB: Technology
AICPA: BB Industry
Blooms: Apply
Difficulty: 3 Hard
22.
If all other factors specified in an attributes sampling plan remain constant,

decreasing the tolerable rate and decreasing the risk of assessing control risk too
low would have what effect on sample size?
A.
B.
C.
D.
Increase.
Remain the same.
Decrease.
AACSB: Technology
9-27
AICPA: BB Industry
Blooms: Apply
Difficulty: 3 Hard
23.

decreasing the tolerable rate and increasing the estimated population deviation
rate would have what effect on sample size?
A.
B.
C.
D.
Increase.
Remain the same.
Decrease.

AACSB: Technology
AICPA: BB Industry
Blooms: Apply
Difficulty: 3 Hard
24.
An increase in the tolerable misstatement has what effect on the planned

allowance for sampling risk?
A.
B.
C.
D.
Increases.
Decreases.
No effect.
Indeterminate.

AACSB: Technology
AICPA: BB Industry
Blooms: Understand
9-28
25.
Which of the following is not generally used for selecting samples?

A.
B.
C.
D.
Random number tables.

Random number generators.
Physical representation numbers.
AACSB: Technology
AICPA: BB Industry
Blooms: Remember
Difficulty: 1 Easy
26.
In performing a test of a control last year the auditors specified a tolerable

deviation rate of X percent. This year the auditors have specified a tolerable rate
of less than X percent. Assuming that all other factors remain the same, which of
the following is true regarding the relationship between this year's sample size
compared to last year's sample size?
A. This year's sample is larger than last year's sample.
B.
This year's sample is smaller than last year's sample.
C.
This year's sample is equal to last year's sample.
D. This year's sample is indeterminate in relation to last year's sample.
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
27.
The auditor using nonstatistical attributes sampling, but who nevertheless has
chosen the sample in conformity with random selection procedures:
A. Need not consider the risk of assessing control risk too low.
B.
Has committed a nonsampling error.
C. Will have to use discovery sampling techniques to evaluate the results.
D. Should compare the deviation rate of the sample to the tolerable rate.
AACSB: Technology
AICPA: BB Industry
9-29

Blooms: Understand
methods.
28.
When performing tests of controls over authorization of cash receipts, which of the
following sampling methods would be most appropriate?
A.
B.
C.
D.
Attributes.
Ratio.
Stratified.
Variables.

AACSB: Technology
AICPA: BB Industry
Blooms: Remember
Difficulty: 1 Easy
29.
Which of the following statistical sampling techniques involves taking samples in a

series of stages?
A.
B.
C.
D.
Systematic sampling.
Sequential sampling.
Continuous sampling.
Multiple location sampling.

AACSB: Technology
AICPA: BB Industry
Blooms: Remember
Difficulty: 1 Easy
9-30
30.
Which of the following is generally not true about statistical sampling as compared
to nonstatistical sampling?
A. Statistical samples are more representative of the population.
B. Statistical sample plans involve additional costs of evaluation.
C. Statistical sampling allows a more objective evaluation of sample results.
D. Statistical sampling may assist the auditors in designing more efficient
samples.
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
31.
When using statistical sampling, which of the following need not be known to
evaluate the results of an attributes sample?
A.
B.
C.
D.
Sample size.
Risk of assessing control risk too low.
Number of deviations in the population.
Number of deviations found in the sample.

AACSB: Technology
AICPA: BB Industry
Blooms: Remember
Difficulty: 1 Easy
32.
When the auditors have decided to use statistical rather than nonstatistical
sampling, a disadvantage is that:
A.
B.
C.
D.
Designing efficient samples is more difficult.

The costs of training staff may be higher.
Sampling without replacement must be used.
Objectively evaluating results is impossible.
AACSB: Technology
AICPA: BB Industry
9-31
Blooms: Remember
Difficulty: 1 Easy
33.
Changing from a sampling plan using random selection with replacement to

random selection without replacement has what effect on the required sample
size?
A.
B.
C.
D.
Increases.
Decreases.
No effect.
An indeterminate effect.
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
34.
When the auditors have chosen to test a control, what relationship will the
tolerable rate normally have when compared to the expected rate of deviations in
the sample?
A.
B.
C.
D.
Exceed.
Equal.
Be less than.
Indefinite.
AACSB: Reflective Thinking

AACSB: Technology
AICPA: BB Critical Thinking
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 09-04 Explain the effects of changes in various population characteristics and changes in
sampling risk on required sample size.
35.
Increases in the planned allowance for sampling risk have what effect on required
sample size?
A.
B.
C.
D.
Increases.
Decreases.
No effect.
Indeterminate.
9-32
AACSB: Technology
Blooms: Understand
36.
When using sampling for tests of controls, which of the following audit
consequences may follow?
A. If sample results indicate that the control is operating effectively, but in fact it is
not, control risk will be assessed too low.
B. If sample results indicate that the control is operating effectively, but in fact it is
not, control risk will be assessed too high.
C. If sample results indicate that the control is not operating effectively, but in fact
it is operating effectively, the audit is likely to be faulty because of reduced
substantive tests.
D. If sample results indicate that the control is not operating effectively, but in fact
it is operating effectively, control risk will be assessed too low.
AACSB: Technology
AICPA: BB Industry
Blooms: Apply
Difficulty: 3 Hard
37.
The auditors expect a population deviation rate of billing errors of two percent, and
have established a tolerable rate of five percent. The sampling approach most
likely to be used is:
A.
B.
C.
D.
Stratified sequential sampling.
Discovery sampling.
None, as sampling does not seem appropriate in this situation.

AACSB: Technology
Blooms: Remember
Difficulty: 1 Easy
9-33
38.
The auditors expect a population deviation rate of billing errors of eight percent,
and have established a tolerable rate of five percent. The sampling approach most
likely to be used is:
A.
B.
C.
D.
Stratified random sampling.
Variables sampling.
None, as sampling does not seem appropriate in this situation.

AACSB: Technology
Blooms: Understand
39.
Which of the following may be used to reduce the risk of nonsampling errors?
A.
B.
C.
D.
Increasing the size of audit samples.

Stratifying audit samples.
Adequately planning audit samples.
Using statistical sampling techniques.
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
40.
Which of the following types of risk is of critical importance to auditors in

performing tests of controls?
A.
B.
C.
D.
The risk of assessing control risk too low.

The risk of assessing control risk too high.
The risk of incorrect acceptance.
The risk of incorrect rejection.
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
9-34
41.
The auditors' failure to recognize a misstatement in an amount or a deviation in an

internal control data processing procedure is described as a:
A.
B.
C.
D.
Statistical error.
Sampling misstatement.
Standard error of the mean.
Nonsampling error.

AACSB: Technology
AICPA: BB Industry
Blooms: Remember
Difficulty: 1 Easy
42.
What effect does obtaining a sample with a standard deviation larger than that
estimated during planning have on the adjusted allowance for sampling risk?
A.
B.
C.
D.
Increases.
Decreases.
No effect.
Indeterminate.

AACSB: Technology
Blooms: Apply
Difficulty: 3 Hard
9-35
43.
The 2,000 accounts receivable of ABC Company have a total book value of
$40,000. Bob Rotter, CPA, has selected and audited a sample of 100 accounts with
a total book value of $1,950. The audited value of the 100 accounts in the sample
is $1,875.
Using the mean-per-unit estimation technique, Rotter's estimate (to the nearest
dollar) of year-end accounts receivable balance would be:
A.
B.
C.
D.
$37,500
$38,462
$38,500
$41,600

AACSB: Technology
AICPA: BB Industry
Blooms: Understand
sampling.
44.
Using the ratio estimation technique, Rotter's estimate (to the nearest dollar) of
year-end accounts receivable balance would be:
A.
B.
C.
D.
$37,500
$38,462
$38,500
$41,600
AACSB: Technology
AICPA: BB Industry
Blooms: Apply
Difficulty: 3 Hard
45.
Using the difference estimation technique, Rotter's estimate (to the nearest dollar)
of year-end accounts receivable balance would be:
A.
B.
C.
D.
$37,500
$38,462
$38,500
$41,600
AACSB: Technology
AICPA: BB Industry
9-36

Blooms: Apply
Difficulty: 3 Hard
46.
$60,000. Bob Smith, CPA, has selected and audited a sample of 100 accounts with
a total book value of $2,100. Using the difference estimation technique, Smith has
properly estimated a projected misstatement of an overstatement of $6,000 for
the entire population. The audited value of Smith's sample is:
A.
B.
C.
D.
$1,700
$1,800
$1,900
$2,300
AACSB: Technology
AICPA: BB Industry
Blooms: Apply
Difficulty: 3 Hard
47.
a total book value of $2,100. Using the difference estimation technique, Smith has
properly estimated a projected misstatement of a $9,000 overstatement for the
entire population. The estimated total audited value of the population is:
A.
B.
C.
D.
$51,000
$58,000
$60,000
$69,000
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
9-37
48.
The 4,000 accounts receivable of GHI Company have a total book value of
a total book value of $1,600. Using the mean-per-unit estimation technique, Smith
has properly estimated a projected misstatement of a $8,000 overstatement for
the entire population. The audited value of Smith's sample is:
A.
B.
C.
D.
$1,300
$1,400
$1,600
$1,800

AACSB: Technology
AICPA: BB Industry
Blooms: Apply
Difficulty: 3 Hard
sampling.
49.
Which of the following is a correct statement with respect to evaluating results

when using nonstatistical sampling for substantive tests?
A. When the projected misstatement exceeds the tolerable misstatement, the
auditor should conclude that the population is not misstated.
B. The closer the projected misstatement is to the tolerable misstatement, the
higher the risk of material misstatement.
C. When the projected misstatement is equal to zero, the auditors may conclude
with certainty that no misstatements exist in the account.
D. When the projected misstatement percentage exceeds the risk of incorrect
acceptance the auditors will generally conclude that the population is
materially misstated.
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
9-38
50.
Assume a mean-per-unit estimation variables sampling application with a tolerable

$45,000 and a point estimate of the population's total audited value to be
$650,000. Based on these results, the auditor would:
A. Because the tolerable misstatement exceeds the adjusted allowance for
sampling risk, conclude that the population does not contain a material
misstatement.
B. Because the total audited value tolerable misstatement includes the book
value, conclude that the population does not contain a material misstatement.
C. Because the tolerable misstatement exceeds the adjusted allowance for
sampling risk, conclude that there is too great a risk that the account balance is
materially misstated.
D. Because the total audited value adjusted allowance for sampling risk does
not include the book value, conclude that there is too great a risk that the
account balance is materially misstated.

AACSB: Technology
AICPA: BB Industry
Blooms: Apply
Difficulty: 3 Hard
sampling.
51.
Assume a mean-per-unit estimation variables sampling application with a tolerable

$45,000 and a point estimate of the population's total audited value to be
$640,000. The projected misstatement based on this sample is:
A.
B.
C.
D.
$5,000
$45,000
$60,000
$70,000

AACSB: Technology
AICPA: BB Industry
Blooms: Understand
sampling.
9-39
52.
The auditors have audited a sample with a standard deviation of audited values
larger than they had originally estimated. In this situation, to maintain the risk of
incorrect acceptance at its predetermined level without increasing the size of the
sample, which of the following statements is correct?
A. The adjusted allowance for sampling risk will be smaller than had been
planned.
B. The adjusted allowance for sampling risk will be larger than had been planned.
C. The risk of incorrect rejection will necessarily decrease.
D.
The size of the population must be decreased.

AACSB: Technology
Blooms: Apply
Difficulty: 3 Hard
53.
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.
B.
C.
D.
Mean-per-unit estimation.
Ratio estimation.
Difference estimation.
Sequential sampling estimation.
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
9-40
54.
Which of the following statements is correct concerning the use of nonstatistical

sampling for substantive tests?
A. Its use is generally acceptable only for populations with an immaterial book
value.
B. It requires the use of structured sample size selection techniques to be
acceptable.
C. It may be especially useful in circumstances in which the combination of
inherent and control risk is at the maximum level.
D.
Results will be projected to the population.
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
55.
Which of the following situations will result in the auditors concluding that the risk
of material misstatement is too high when using nonstatistical sampling for
substantive tests?
A.
B.
C.
D.
The projected misstatement exceeds the tolerable misstatement.

The allowance for sampling risk exceeds the projected misstatement.
The risk of incorrect acceptance exceeds the risk of incorrect rejection.
The tolerable misstatement exceeds the sample net misstatement.

AACSB: Technology
AICPA: BB Industry
Blooms: Apply
Difficulty: 3 Hard
methods.
56.
During the final planning of the accounts receivable plan a CPA specified a
tolerable misstatement of $30,000, instead of the $20,000 contained in the
preliminary audit plan. What would be the impact of this change?
A.
B.
C.
D.
A decrease in population standard deviation.

An increase in sample standard deviation.
An increase in required sample size.
A decrease in the required sample size.
AACSB: Technology
9-41
AICPA: BB Industry
Blooms: Understand
sampling.
57.
Which of the following is an advantage of systematic selection over random

number selection?
A.
It provides a stronger basis for statistical conclusions.
B. It enables the auditor to use the more efficient "sampling with replacement"
tables.
C. There may be correlation between the location of items in the population, the
feature of sampling interest, and the sampling interval.
D. It does not require establishment of correspondence between random numbers
and items in the population.
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
Source: AICPA
58.
Statistical sampling generally may be applied to test internal control when the
client's internal control procedures:
A.
Depend primarily on appropriate segregation of duties.
B. Are carefully reduced to writing and are included in client accounting manuals.
C. Leave an audit trail in the form of evidence of compliance.
D. Enable the detection of material fraud in the accounting records.
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
Source: AICPA
9-42
59.
Which of the following statements is correct about the sample size in statistical
sampling when testing internal controls?
A. The auditor should consider the tolerable rate of deviation from the controls
being tested in determining sample size.
B. As the likely rate of deviation decreases, the auditor should increase the
planned sample size.
C. The allowable risk of assessing control risk too low has no effect on the planned
sample size.
D. Of all the factors to be considered, the population size has the greatest effect
on the sample size.
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
Source: AICPA
60.
To determine sample size in an attribute sampling application, what must be

specified?
A. Population mean, expected error rate, allowance for sampling risk.
B. Allowance for sampling risk, risk of assessing control risk too low, standard
deviation.
C. Allowance for sampling risk, risk of assessing control risk too low, expected
deviation rate.
D. Population mean, standard deviation, allowance for sampling risk.
AACSB: Technology
AICPA: BB Industry
Blooms: Apply
Difficulty: 3 Hard
Source: IIA
9-43
61.
The tolerable deviation rate in sampling for tests of controls is:

A. Used to determine the probability of the auditor's conclusion based upon
reliance factors.
B. The probability that the financial statements are not materially in error.
C.
A measure of the reliability of substantive tests.
D. The rate the auditor will tolerate without modifying the planned assessment of
control risk.
AACSB: Technology
AICPA: BB Industry
Blooms: Remember
Difficulty: 1 Easy
62.
In testing accounts receivable, an auditor sends out positive confirmation requests

to 100 randomly selected customers. A customer returns the confirmation
indicating that the balance is correct when, in fact, the balance is overstated. This
is an example of:
A.
B.
C.
D.
Projected misstatement.
Sampling error.
Standard error.
Nonsampling error.
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
Source: IIA
9-44
63.
An auditor wishes to estimate inventory shrinkage by weighing a sample of

inventory items. From experience, the auditor knows that a few specific items are
subject to unusually large amounts of shrinkage. In using statistical sampling, the
auditor's best course of action is to:
A. Eliminate any of the items known to be subject to unusually large amounts of
shrinkage.
B. Increase the sample size to lessen the effect of the items subject to unusually
large amounts of shrinkage.
C. Stratify the inventory population so that items subject to unusually large
amounts of shrinkage are reviewed separately.
D. Continue to draw new samples until a sample is drawn which includes none of
the items known to be subject to large amounts of shrinkage.
AACSB: Technology
AICPA: BB Industry
Blooms: Apply
Difficulty: 3 Hard
Source: IIA
64.

changing the specified tolerable rate from 6% to 10%, and changing the specified
risk of assessing control risk too low from 3% to 7% would cause the required
sample size to:
A.
B.
C.
D.
Increase.
Remain the same.
Decrease.
Change by 4%.

AACSB: Technology
AICPA: BB Industry
Blooms: Apply
Difficulty: 3 Hard
Source: AICPA
9-45
65.
Which of the following factors does an auditor need to consider in planning a

particular audit sample for a test of control?
A.
B.
C.
D.
Number of items in the population.

Total dollar amount of the items to be sampled.
Acceptable level of risk of assessing control risk too low.
Tolerable misstatement.

AACSB: Technology
AICPA: BB Industry
Blooms: Understand
Source: AICPA
66.
When using a statistical sampling plan, the auditors would probably require a
smaller sample if the:
A.
B.
C.
D.
Population increases.
Desired allowance for sampling risk decreases.
Desired risk of incorrect acceptance increases.
Expected deviation rate increases.

AACSB: Technology
AICPA: BB Industry
Blooms: Understand
Source: AICPA
67.
Which of the following statements is correct concerning statistical sampling in

tests of controls?
A. The population size has little effect on determining sample size except for very
small populations.
B. The expected population deviation rate has little or no effect on determining
sample size except for very small populations.
C. As the population size doubles, the sample size also should double.
D. For a given tolerable rate, a larger sample size should be selected as the
expected population deviation rate decreases.
AACSB: Technology
9-46
AICPA: BB Industry
Blooms: Understand
Source: AICPA
68.
An advantage of using statistical sampling techniques is that such techniques:

A.
Mathematically measure risk.
B.
Eliminate the need for judgmental decisions.
C. Define the values of allowance for sampling risk and tolerable misstatement
required to provide audit satisfaction.
D. Have been established in the courts to be superior to judgmental sampling.
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
Source: AICPA
69.
In assessing sampling risk, the risk of incorrect rejection and the risk of assessing
control risk too high relate to the:
A.
B.
C.
D.
Efficiency of the audit.

Effectiveness of the audit.
Selection of the sample.
Audit quality controls.

AACSB: Technology
AICPA: BB Industry
Blooms: Understand
Source: AICPA
9-47
70.
When performing a test of a control over cash disbursements, a CPA may use a
systematic sampling technique with a start at any randomly selected item. The
biggest disadvantage of this type of sampling is that the items in the population:
A. Must be recorded in a systematic pattern before the sample can be drawn.
B. May occur in a systematic pattern and destroy the sample randomness.
C. May systematically occur more than once in the sample.
D. Must be systematically replaced in the population after sampling.
AACSB: Technology
AICPA: BB Industry
Blooms: Remember
Difficulty: 1 Easy
Source: AICPA
71.
While performing a substantive test of details during an audit, the auditor

determined that the sample results supported the conclusion that the recorded
account balance was materially misstated. It was, in fact, not materially misstated.
This situation illustrates the risk of:
A.
B.
C.
D.
Incorrect acceptance.
Incorrect rejection.
Assessing control risk too high.
Assessing control risk too low.

AACSB: Technology
AICPA: BB Industry
Blooms: Understand
sampling.
Source: AICPA
Topic: Audit Sampling for Substantive Procedures
9-48
72.
An auditor plans to examine a sample of 20 checks for counter signatures as

prescribed by the client's control procedures. One of the checks in the chosen
sample of 20 cannot be found. The auditor should consider the reasons for this
limitation and:
A.
Evaluate the results as if the sample size had been 19.
B. Treat the missing check as a deviation for the purpose of evaluating the
sample.
C. Treat the missing check in the same manner as the majority of the other 19
checks, i.e., countersigned or not.
D. Choose another check to replace the missing check in the sample.
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
Source: AICPA
73.
There are many kinds of statistical estimates that an auditor may find useful, but
basically every statistical estimate in auditing is of either a quantity or of an error
rate. The statistical terms that roughly correspond to "quantities" and "occurrence
rate," respectively, are:
A.
B.
C.
D.
Attributes and variable.

Variables and attributes.
Constants and attributes.
Constants and variables.
AACSB: Technology
AICPA: BB Industry
Blooms: Remember
Difficulty: 1 Easy
Source: AICPA
9-49
74.
Which of the following best illustrates the concept of sampling risk?

A. A randomly chosen sample may not be representative of the population as a
whole on the characteristic of interest.
B. An auditor may select audit procedures that are not appropriate to achieve the
specific objective.
C. An auditor may fail to recognize deviations in the documents examined for the
chosen sample.
D. The documents related to the chosen sample may not be available for
inspection.
AACSB: Technology
AICPA: BB Industry
Blooms: Remember
Difficulty: 1 Easy
Source: AICPA
75.
Which of the following statistical selection techniques is least desirable for use by
an auditor?
A.
B.
C.
D.
Stratified selection.
Block selection.
Sequential selection.
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
Source: AICPA
76.
Various factors influence the sample size for a substantive test of details of an
account balance. All other factors being equal, which of the following would lead to
a larger sample size?
A.
B.
C.
D.
Lower assessment of control risk.

Greater reliance on analytical procedures.
Smaller expected frequency of misstatements.
Smaller measure of tolerable misstatement.
AACSB: Technology
9-50

Blooms: Apply
Difficulty: 3 Hard
Source: AICPA
77.
An important statistic to consider when using a statistical sampling audit plan is

the population variability. The population variability is measured by the:
A.
B.
C.
D.
Sample mean.
Standard deviation.
Standard error of the sample mean.
Estimated population total minus the actual population total.

AACSB: Technology
AICPA: BB Industry
Blooms: Remember
Difficulty: 1 Easy
Source: AICPA
78.
In variables estimation sampling, the sample standard deviation is used to

calculate the:
A.
B.
C.
D.
Point estimate of central tendency.

Tainting of the sample interval.
Risk of incorrect acceptance.
Adjusted allowance for sampling risk.

AACSB: Technology
AICPA: BB Industry
Blooms: Remember
Difficulty: 1 Easy
sampling.
Source: AICPA
9-51
79.
Use of the ratio estimation sampling technique to estimate dollar amounts is

inappropriate when:
A. The total book value is known and corresponds to the sum of all the individual
book values.
B.
A book value for each sample item is unknown.
C. There are some observed differences between audited values and book values.
D. The audited values are nearly proportional to the book value.
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
Source: AICPA
Essay Questions
9-52
80.
Auditors have a variety of sampling approaches available. For each approach in

the first column, identify the correct statement in the second column. Each
statement may be used once, more than once, or not at all.
Approach
Statement
A.
1.
B.
Difference estimation sampling.
A classical variables sampling plan enabling the auditors to est

2. (or other variable) of items in a population by determining the
sample.
C.
Discovery sampling.
3.
A classical method that uses the audited values of all populatio

total audited value.
D.
Mean-per-unit estimation sampling. 4.
A method that is most effective in circumstances in which audi

occurrence of some critical deviation (e.g., a fraudulent cash d
E.
Probability-proportional-to-size
sampling.
5. A method that defines the sampling unit as each individual dol
F.
Ratio estimation sampling.
6.
A classical method that uses both the audited and book values
obtain an estimated total audited value.
A method that sums the allowance for sampling risk and the sa
estimated total audited value.
7. A method that relies upon decreasing the tolerable misstateme
8. The most frequently used general method that arrives at an es
A. 8
B. 1
C. 4
D. 2
E. 5
F. 1
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
9-53
81.
Audit sampling is used in conjunction with many audit tests, and may be
performed on a statistical or nonstatistical basis.
a. Define the term audit sampling.
b. List and explain two advantages of the use of statistical sampling as compared
to nonstatistical sampling.
a. Audit sampling is performing a test on less than 100 percent of an audit

population to make a conclusion about a characteristic of the population.
b. Statistical sampling may assist the auditors in (only two required):
Designing efficient samples.
Measuring the sufficiency of the evidence obtained.
Objectively evaluating sample results (measuring sampling risk).
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
9-54
82.
Teal Corporation has 2,000 accounts receivable, with a total book value of
$200,000. Ricardo Ramaro, CPA, has selected and audited a sample of 100 of the
accounts with a combined book value of $10,100; the total of the audited values
was $11,000. Using the mean-per-unit method, calculate the:
a. Accounts receivable estimated audited value.
b. Projected misstatement.
a. The accounts receivable estimated audited value is calculated as:
Estimated total audited value
b. The projected misstatement is calculated as the difference between the

estimated total audited value and the book value, calculated as follows:
Projected Misstatement = Est. total audited value - Book value of population

= $220,000 - $200,000
= $20,000 overstatement
AACSB: Technology
AICPA: BB Industry
Blooms: Understand
sampling.
9-55
9-56
8 The auditors are using mean-per-unit sampling to evaluate the reasonableness of the
3. book value of the accounts receivable of Smith, Inc. Smith has 10,000 receivable
accounts with a total book value of $800,000. The auditors estimate the population's
standard deviation as being equal to $25. After examining the overall audit plan, the
auditors believe that the account's tolerable misstatement is $40,000, and that a risk
of incorrect rejection of .10 (risk coefficient = 1.64) and a risk of incorrect acceptance
of .15 (risk coefficient = 1.04) should be used.
Required:
a. Calculate the required sample size.
Now ignore your sample size calculation in part "a," and assume that your answer was
a sample size of 289 (the square root of 289 is 17) and that you obtained the following
results:
Average audited value of items in sample: $76
Average book value of items in sample: $78
Standard Deviation in the sample (audited values): $24
Standard Deviation in the sample (book values): $26
b. Using mean-per-unit sampling, calculate the projected misstatement for the
population.
c. Using mean-per-unit sampling, calculate the adjusted allowance for sampling risk
and use it to form a statistical conclusion concerning the book value of the population
($800,000). That is, calculate an interval and either "accept" or "reject" the client's
book value.
a. The required sample size is calculated by first calculating the allowance for
sampling risk and then using it into the sample size formula as follows:
9-57
b. The projected misstatement is calculated by first calculating the estimated total

audited value and then subtracting it from the book value as follows:
Estimated total audited value = (Mean of audited values) (Number of accounts)
Estimated total audited value = ($76) (10,000 accounts) = $760,000
Projected misstatement = Estimated total audited value - Book value of population
= $800,000 - $760,000
= $40,000 overstatement
c. The adjusted allowance for sampling risk (ASR) may be calculated as follows:
Adjusted AR = $25,318
The acceptance interval is $760,000 within an interval of + $25,318. Accordingly, the
population is rejected because its book value of $800,000 is outside the interval.
AACSB: Technology
AICPA: BB Industry
Blooms: Apply
Difficulty: 3 Hard
sampling.
9-58

TBChap 009

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

TBChap 009

Uploaded by

Copyright:

Available Formats

Chapter 09

2. Discovery sampling is equivalent to an attributes sampling plan with a specified

3. Increases in the number of deviations in an attributes sample results in an increase in

5. Statistical sampling cannot be used to test all control activities.

Multiple Choice Questions

18. If the projected misstatement in a nonstatistical sampling is $8,000, while the

Random number tables.

Statistical samples are more representative of the population.

Designing efficient samples is more difficult.

Increasing the size of audit samples.

The risk of assessing control risk too low.

41. The auditors' failure to recognize a misstatement in an amount or a deviation in an

The projected misstatement exceeds the tolerable misstatement.

A decrease in population standard deviation.

Depend primarily on appropriate segregation of duties.

63. An auditor wishes to estimate inventory shrinkage by weighing a sample of inventory

Number of items in the population.

Efficiency of the audit.

72. An auditor plans to examine a sample of 20 checks for counter signatures as

Attributes and variable.

Lower assessment of control risk.

Point estimate of central tendency.

Difference estimation sampling.

A classical variables sampling plan enabling the auditors to estim

A classical method that uses the audited values of all population

Mean-per-unit estimation sampling.

A method that is most effective in circumstances in which audito

5. A method that defines the sampling unit as each individual dollar

Ratio estimation sampling.

7. A method that relies upon decreasing the tolerable misstatemen

8. The most frequently used general method that arrives at an estim

Chapter 09 Audit Sampling Answer Key

Stratification of the population generally results in a more efficient sampling plan.

Discovery sampling is equivalent to an attributes sampling plan with a specified

Increases in the number of deviations in an attributes sample results in an

Statistical sampling cannot be used to test all control activities.

Increases in the tolerable misstatement result in a decreased sample size when

Accessibility: Keyboard Navigation

AACSB: Analytical Thinking

When evaluating the results of a variables sampling plan, the projected

AACSB: Analytical Thinking

Multiple Choice Questions

Using the mean-per-unit estimation method an auditor has properly calculated

AACSB: Analytical Thinking

Using difference estimation, an auditor has taken a sample of 200 from a

Using mean-per-unit estimation, an auditor has taken a sample of 200 from a

AACSB: Analytical Thinking

If the projected misstatement in a nonstatistical sampling is $8,000, while the

AACSB: Analytical Thinking

A dual purpose test simultaneously:

1. Book value of $19.00

AACSB: Analytical Thinking

If all other factors specified in an attributes sampling plan remain constant,

If all other factors specified in an attributes sampling plan remain constant,

AACSB: Analytical Thinking

An increase in the tolerable misstatement has what effect on the planned

AACSB: Analytical Thinking

Which of the following is not generally used for selecting samples?

Random number tables.

In performing a test of a control last year the auditors specified a tolerable

Accessibility: Keyboard Navigation

AACSB: Analytical Thinking

Which of the following statistical sampling techniques involves taking samples in a