AUDIT SAMPLING QUI___________________________ Section:

_______________________________
Date: __________________________________ Score: _________________________________

Multiple Choice questions

Instructions: Encircle the letter of the best answer.

1. Which of the following is not one of the evidence-gathering techniques employed by an auditor
discussed in the text?
a. Reperformance.
b. Inspection.
c. Analytical procedures.
d. Risk assessment.
2. The most reliable form of audit evidence is:
a. Visual observation of a transaction or event by the auditor.
b. Written documents.
c. Analytical procedures.
d. Oral representation of the third parties.
3. When inventory is material to the financial statements, the auditor should obtain sufficient
appropriate audit evidence regarding its existence and condition by:
a. Attendance at physical inventory counting.
b. A review of management’s instructions regarding the application of control procedures.
c. Determination of whether appropriate arrangements were made regarding the movement of
inventory between areas.
d. Accurate identification of slow-moving, obsolete or damaged items and items on consignment.
4. Which of the following is not true of audits of accounting estimates?
a. The auditor must gain an understanding of relevant controls for accounting estimates.
b. Management must base estimates on legal or other expert advice.
c. The auditor must obtain an understanding of how management identifies accounting estimates
that are needed and how these estimates are made.
d. An amount measured at fair value where there is estimation uncertainty.
5. Audit sampling (sampling) is the application of audit procedures to __________ such that all
sampling units have a chance of selection in order to provide the auditor with a reasonable basis on
which to draw conclusions about the entire population.
a. All of the items within a population of relevant items.
b. Source documents such as sales invoices.
c. Documents judged to be significant.
d. Less than 100 per cent of items within a population of relevant items.
6. Sampling risk is the risk that the auditor’s conclusion based on a sample may __________ the
conclusion if the entire population were subjected to the same audit procedure.
a. Be the same as.
b. Be different from.
c. Not be material to.
d. be material to.
7. A request that the confirming party respond directly to the auditor indicating whether the
confirming party agrees or disagrees with the information in the request, or providing the requested
information, is called a:
a. Negative confirmation.
 b. Management representation letter.
c. Customer letter.
d. Positive confirmation.
8. Which of the following is not one of the four key characteristics of the confirmation process?
a. Positive confirmation involves a receipt of information.
b. Response comes from an independent third party.
c. Request and response is in writing, sent to the auditor.
d. Information is requested by audit client.
9. Which of the following is an objective of the auditor in obtaining written representations from
management?
a. To support other audit evidence relevant to the financial statements.
b. To inform audit clients of the responsibilities of the auditor.
c. To inform audit clients of the responsibilities of the audit client.
d. To give the scope of auditor fees.
10. Which of the following is not true about the evidence-gathering technique of inquiry?
a. Inquiry consists of consists of looking at a process or procedure being performed by others.
b. Inquiry alone ordinarily does not provide sufficient audit evidence of the absence of a material
misstatement at the assertion level, nor of the operating effectiveness of controls.
c. Inquiry cannot be regarded as conclusive because it is not from an independent source and
might be biased.
d. The largest amount of audit evidence in an audit is obtained from client inquiry.
11. Which of the following statements is not part of the definition of a related party?
a. A transfer of resources or obligations between a company and management.
b. Another entity that is under common control with the reporting entity through having: common
controlling ownership; owners who are close family members; or common key management.
c. Another entity over which the reporting entity has control or significant influence, directly or
indirectly through one or more intermediaries, regardless of whether a price is charged.
d. A person or other entity that has control or significant influence, directly or indirectly through
one or more intermediaries, over the reporting entity.
12. When inventory is material to the financial statements, the auditor should obtain sufficient
appropriate audit evidence regarding its existence and condition by:
a. Attendance at physical inventory counting.
b. Performing audit procedures over the entity’s final inventory records to determine inventory
shipments.
c. Reviewing all sales invoices and bills of lading.
d. Performing audit procedures over the entity’s final inventory records to determine inventory
receipts.
13. An alternate procedure for attending physical inventory is:
a. Take the averages of the last interim inventories and calculate what ending inventory should be.
b. Take an interim inventory and using statistics predict the period ending inventory.
c. Inspection of documentation of the subsequent sale of specific inventory items acquired or
purchased prior to the physical inventory counting.
d. Take an interim inventory and roll it backwards.
14. What is not true of internal and external documents?
a. External documents like title to property, insurance policies and contracts are very reliable
evidence.
b. Internal documents processed under good internal controls are more reliable than those
processed under weak controls.
 c. External documents may be processed by both internal and external parties representing
agreement.
d. Internal documents require supporting evidence.
15. An audit process whereby the auditor selects sample items from an account and goes backwards
through the accounting system to find the source documentation that supports the item selected is
known as:
a. Vouching.
b. Analytical procedures.
c. Trend analysis.
d. Tracing.