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Audit sampling

1 Which of the following is not an aspect of sampling risk?


A) Risk of assessing control risk (and the risk of material
misstatement) too high.
B) Risk of not identifying a misstatement included in a
sample.
C) Risk of incorrect acceptance.
D) Risk of sampling results indicating that a population is
materially misstated when it is not.

2 Which type of sampling plan is most frequently used in testing


control activities?
A) Attributes sampling
B) Discovery sampling.
C) Probability proportional sampling
D) Classical variables sampling.

3 What is ordinarily the preferable course of action when an


auditor finds a higher than expected deviation rate when
sampling controls?
A) Triple the size of the sample to further analyze
potential problems.
B) Project the level of deviation to the entire sample, and
if material qualify the audit opinion.
C) Continue to selection items from the population until
the error rate diminishes to a tolerable level.
D) Expand substantive procedures.

4 The mean-per-unit estimation method calculates the


estimated total audited value of a population of accounts
receivable as which of the following?
A) A summation of the total individual accounts values in
the population.
B) The sample mean audited value multiplied by the
number of items in the population.
C) The estimated total audited value of the population
multiplied by the number of items in the sample.
D) The summation of the sample multiplied by the number
of discrete samples in the population.

5 The projected misstatement under the mean-per-unit


estimation is which of the following?
A) Difference between the sample audited mean and the
population audited mean.
B) Difference between the projected misstatement and
the population mean for the population.
C) Difference between the book value of the population
and the sample audited mean multiplied times the
number of items in the population.
D) Average difference between the projected audit value
and the book value of an account.

6 What is the best description of "tolerable misstatement" for


mean-per-unit estimation?
A) The maximum misstatement that may exist without
causing an account to be materially misstated.
B) The "bounds" around the sample mean that we would
expect the value to fall within to be correct.
C) The "projected" misstatement in the population based
upon the sample chosen.
D) The upper limit (or lower limit for liabilities) of asset
values for which the book value may exceed that
sample mean without being materially misstated.

7 What is the best description of a planned allowance for


sampling risk under mean-per-unit estimation?
A) The projected misstatement in the population based
upon the sample chosen.
B) The maximum misstatement that may exist without
causing the financial statements to be materially
misstated.
C) An amount used to calculate the "bounds" around the
sample mean that we would expect the value to fall
within to be correct.
D) The upper limit (or lower limit for liabilities) of asset
values for which the book value may exceed that
sample mean without being materially misstated.
8 In the course of auditing accounts receivable, the auditors
calculated the estimated total audited value ($3,100,000), the
allowance for sampling risk ($100,000), and the tolerable
misstatement ($175,000). If the book value of accounts
receivable is $3,250,000, what is the audit conclusion and
projected misstatement?
A) Conclude the book value is materially misstated and
the projected misstatement is $150,000.
B) Conclude the book value is materially misstated and
the projected misstatement is $50,000.
C) Conclude the book value is not materially misstated
and the projected misstatement is $150,000.
D) Conclude the book value is not materially misstated
and the projected misstatement is $50,000.

9 When are the ratio estimation and difference estimation


techniques most likely to be preferable to the mean-per-unit
estimation method?
A) The choice between any of the methods method is
irrelevant, since they all provide similar results.
B) When differences between book and audited values are
infrequent.
C) When differences between book and audited values are
frequent.
D) When differences between book and projected
misstatement is estimated to be small.

10 A company's 1,000 accounts receivable have a total book


value of $40,000 (Average book value = $40). An audited
sample of 50 accounts resulted in the following mean values:
Book value of $38.00
Audited value of $39.20
What is the estimated total audited value using mean per unit
sampling?
A) $38,000
B) $38,776
C) $39,200
D) $41,200
11 A company's 1,000 accounts receivable have a total book
value of $40,000 (Average book value = $40). An audited
sample of 50 accounts resulted in the following mean values:
Book value of $38.00
Audited value of $39.20
What is the estimated total audited value using difference
estimation sampling?
A) $38,000
B) $38,776
C) $39,200
D) $41,200

12 A company's 1,000 accounts receivable have a total book


value of $40,000 (Average book value = $40). An audited
sample of 50 accounts resulted in the following mean values:
Book value of $38.00
Audited value of $39.20
What is the estimated total audited value using ratio
estimation sampling?
A) $38,776
B) $39,200
C) $41,200
D) $41,263

13 In determining the sample size using a structured


nonstatistical sample, the reliability factor used takes into
consideration the auditor's assessment of?
A) Control risk, inherent risk, and risk related to other
substantive procedures.
B) Control risk and detection risk.
C) Control risk and inherent risk.
D) Detection risk.

14 What is the major difference between statistical and


nonstatistical sampling in substantive testing?
A) In nonstatistical sampling the determination of the
sample size is ad hoc based upon the auditors'
professional judgment.
B) In nonstatistical sampling the level of risk is not
formally quantified, instead auditors use their
professional judgment.
C) The results of nonstatistical sampling are not as
reliable as those in statistical sampling.
D) Nonstatistical sampling uses more randomized methods
for sample selection and thus is more reliable.

15 If the projected misstatement in nonstatistical sampling is


$95,000, while the tolerable misstatement is $100,000, what
would an auditor likely conclude?
A) Since the projected misstatement is less than the
tolerable misstatement, the auditor would conclude the
account is not misstated.
B) Since the projected misstatement is less than the
tolerable misstatement, the auditor would conclude the
account is misstated.
C) The auditor would conclude that the risk is high that
the account is materially misstated.
D) There is not enough information to answer this
question.