IMUS INSTITUTE

OF SCIENCE AND TECHNOLOGY

COLLEGE OF ACCOUNTANCY

ASSURANCE PRINCIPLES AND GOOD GOVERNANCE

1st Semester S.Y. 2021
(Dr. Catherine O. Aquino, CPA)

Name:Karluz Mhore D. Trugo Score: _________________

AUDIT SAMPLING

1. For which of the following audit tests would an auditor most likely use attribute sampling?
A. Selecting accounts receivable for confirmation of account balances.
B. Examining invoices in support of the valuation of property, plant, and equipment additions.
C. Making an independent estimate of the amount of FIFO inventory.
D. Inspecting employee time cards for proper approval by supervisors.
2. Which of the following sampling methods would be used to estimate a numerical measurement
of a population, such as a peso value?
A. Variable sampling
B. Attribute sampling
C. Random-number sampling
D. Stop-or-go sampling
3. Which of the following combinations results in a decrease in sample size in an attribute sample?
Allowable risk
Of assessing
Control risk Tolerable Expected Population
Too low Deviation rate Deviation rate
A. Increase increase increase
B. Decrease increase decrease
C. Increase increase decrease
D. Increase decrease increase

4. In determining the number of documents to select for a test to obtain assurance that all sales
returns have been properly authorized, an auditor should consider the tolerable rate of deviation
from the control activity. The auditor should also consider the
I. Likely rate of deviations.
II. Allowable rick of assessing control risk too high.
A. I only
B. II only
C. Both I and II
D. Either I or II
5. Which of the following factors is usually not considered in determining the sample size for a
test of controls?
A. Expected population deviation rate
B. Risk of assessing control risk too low
C. Tolerable deviation rate
D. Population size, when the population is large.
6. The sample size of a test of controls varies inversely with
Tolerable Expected
Deviation rate (TDR) Deviation rate( EDR)
A. No No
B. Yes Yes
C. No Yes
D. Yes No

7. In planning a statistical sample for a test of controls, an auditor increased the expected
population deviation rate (EDR) from the prior year’s rate because of the results of the prior
year’s test of controls and the overall control environment. The auditor most likely would then
increase the planned
A. Risk of assessing control risk too low.
B. Sample size
C. Allowance for sampling risk.
D. Tolerable deviation rate.

8. Which of the following courses of action would an auditor most likely follow in planning a
sample of cash disbursements if the auditor is aware of several unusually large cash
disbursements?
A. Continue to draw new samples until all the unusually large disbursements appear in the
sample.
B. Increase the sample size to reduce the effect of the unusually large disbursements.
C. Stratify the cash disbursements population so that the unusually large disbursements are
selected.
D. Set the tolerable rate of deviation at a lower level than originally planned.
9. A number of 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. Smaller measure of tolerable misstatement.
B. Smaller expected frequency of errors.
C. Greater reliance on analytical procedures.
D. Greater reliance on internal control.
10. An auditor established a P180, 000 tolerable misstatements for an asset with an account balance
of P3, 000,000. The auditor selected a sample of every 20th item from the population that
represented the asset account balance and discovered a net overstatement of P10, 500 (P11, 100
overstatements minus P600 understatements). Under these circumstances, the auditor most
likely would conclude that
A. The asset account is fairly stated because the tolerable misstatement exceeds the net of
projected actual overstatements and understatements.
B. The asset account is fairly stated because the total projected misstatement is less than the
tolerable misstatement.
C. There is an unacceptable high risk that the actual misstatements in the population exceed the
tolerable misstatements because the total projected misstatements exceeds the tolerable
misstatement.
D. There is an acceptably high risk that the tolerable misstatement is more than the sum of
actual overstatements and understatements.
11. Which of the following sample selection methods is not appropriate when using statistical
sampling?
A. Random selection
B. Systematic selection
C. Monetary unit sampling
D. Haphazard selection
12. Which of the following sample selection methods cannot ordinarily be used in audit sampling?
A. Value-weighted selection
B. Random selection
C. Block selection
D. Systematic selection

13. In audit sampling,____________ involves dividing the population into discrete sub-
populations which have an identifying characteristic.
A. Value-weighted selection
B. Stratification
C. Random selection
D. Block selection

14. Which of the following statements relating to stratification is incorrect?

A. When performing test of details of translations and account balances, the population is often
stratified by monetary value.
B. The results of audit procedures applied to a sample of items within a stratum can be
projected to the entire population.
C. When verifying the valuation assertion for accounts receivable, account balances may be
stratified by age.
D. Stratification reduces the variability of items within each stratum.

15. Audit efficiency may be improved when the sampling unit is defined as the individual monetary
units that comprise the population. This technique is called
A. Stratification
B. Random selection
C. Systematic selection
D. Value-weighted selection

16. In designing audit procedures, the auditor is required to determine appropriate means of
selecting items for testing to gather audit evidence. Which of the following means is/are
available to auditor?
I. Selecting all items (100% examination)
II. Selecting specific items.
III. Audit sampling.
A. I and II only
B. III only
C. I and III only
D. I, II, and III

17. Which of the following should be considered by the auditor in deciding which means ( or
combination of means) to use in selecting items for testing?
I. The risk of material misstatement related to the assertion being tested.
II. Audit efficiency.

A. I only
B. Ii only
C. Both I and II
D. Neither I nor II
18. It will be appropriate to audit all the items that make up a class of transactions or account
balance (100% examination), except
A. When the class of transactions or account balance consist of a large number of small value
items.
B. When the class of transactions or account balance consist of a small number of large value
items.
C. When there is a significant risk of misstatement and other selection methods do not provide
sufficient appropriate audit evidence.
D. When the repetitive nature of a calculation or other process performed automatically by the
clients computer information system (CIS) makes a 100% examination cost effective.

19. PSA 500 states that the auditor may decide to select specific items from a population based on
such factors as the auditor’s understanding of the entity, the assessed risk of material
misstatement , and the characteristic of the population being tested, specific items that may be
selected for testing usually include the following, except
A. Items that are of high value.
B. Items that are suspicious, unusual, risk-prone, or have a history of error.
C. All items whose values do not exceed a certain amount so as to verify only a small
proportion of the total amount of class of transactions or account balance.
D. Items that provide information matters such as the nature of the entity, the nature of
transactions, and internal control.

20. Audit sampling involve the

A. Selection of all items over a certain amount.
B. Applications of audit procedures to less than 100% of items within a class of transactions or
an account balance such that all items have a chance of selection.
C. Application of audit procedures to all items that comprise a class of transactions or an
account balance.
D. Application of audit procedures to all items over a certain amount and those that are
unusual or have a history of error.

21. Which of the following sample planning factors would influence the sample size for a
substantive test of details for a specific account?
Expected Amount Measure of
Of Misstatements Tolerable Misstatements’
A. Yes Yes
B. No No
C. Yes No
D. No Yes
22. An error that arises from an isolated event that has not recurred other than on specifically
identifiable occasions and in therefore not representative of similar errors in the population is
a/an
A. Anomalous error
B. Isolated error.
C. Scandalous error.
D. Non-recurring error.
23. Which of the following statements concerning projection of errors found in the sample to the
population is incorrect?
A. For test of details, the auditor should project monetary errors found in the sample to the
population, and should consider the effect of the projected error on the audit objective and
on other areas of the audit.
B. Anomalous errors found in the sample should be included in the projection of errors to the
population.
C. For test of controls, no explicit projection of errors is necessary since the sample deviation
rate is also the projected deviation rate for the population as a whole.
D. If a class of transactions or an account balance has been divided into strata, the error is
projected for each stratum separately.
24. In estimation sampling for variables, which of the following must be known to estimate the
appropriate sample size required to meet the auditor’s need in a given situation?
A. The estimated deviation rate in the population.
B. The qualitative aspects of misstatements.
C. The estimated population value.
D. The acceptable level of risk.
25. In applying variables sampling, an auditor attempts to
A. Predict a monetary population value within a range of precision.
B. Estimate a qualitative characteristic of interest.
C. Determine various rates of occurrence for specified attributes.
D. Discover at least one instance of a critical deviation.
26. When planning a sample for a substantive test of details, an auditor should consider tolerable
misstatements for the sample. This consideration should
A. Not be changed during the audit process
B. Be related to the auditor’s business risk.
C. Be related to preliminary judgments’ about materiality levels.
D. Not be adjusted for qualitative factors.
27. An auditor may decide to increase the risk of incorrect rejection when
A. The cost and effort of selecting additional sample items are low.
B. Increased reliability from the sample is desired.
C. Many differences (audit value minus recorded value) are expected.
D. Initial sample results do not support the planned level of control risk.
28. In statistical sampling methods used in substantive testing, an auditor most likely would stratify
a population into meaningful groups if
A. Probability –proportional-to-size (PPS) sampling is used.
B. The population has highly variable recorded amounts.
C. The standard deviation og recorded amounts is relatively small.
D. The auditors estimated tolerable misstatement is extremely small.

29. Which of the following statements is true concerning statistical sampling in tests of controls?
A. For a given tolerable rate, a larger sample size should be selected as the expected population
deviation rate decreases.
B. As the population size doubles, the sample size should also double.
C. The expected population deviation rate has a little or no effect on determining sample size
except for very small populations.
D. The population size has a little or no effect on determining sample size except for very small
populations.
30. Which of the following statements is correct concerning statistical sampling in tests of controls?
A. In determining the tolerable rate, an auditor considers detection risk and the sample size.
B. Deviations from specific control activities at a given rate ordinarily result in misstatements
at a lower rate.
C. As the population size increases, the sample size should increase proportionately.
D. There is an inverse relationship between the expected population deviation rate and the
sample size.
31. An auditor plans to examine a sample of 20 purchase orders for proper approvals as prescribed
by the clients internal control. One of the purchase orders in the chosen sample of 20 cannot be
found, and the auditor is unable to use alternative procedures to test whether the purchase order
was properly approved. The auditor should
A. Choose another purchase order to replace the missing purchase order in the sample.
B. Select a completely new set of 20 purchase orders.
C. Consider this test of controls invalid and proceed with substantive test because internal
control is ineffective.
D. Treat the missing purchase order as a deviation for the purpose of evaluating the sample.
32. An attribute sampling plan may be used to test the effectiveness of controls. The auditors
evaluation of the sampling results ordinarily leads to a conclusion concerning
A. The relation of the population deviation rate to the tolerable rate.
B. Monetary precision exceeding a certain predetermined amount.
C. The population value not being misstated by more than a predetermined amount.
D. Population characteristic occurring at least once in the population.
33. As a result of sampling procedures applied as tests of controls, an auditor incorrectly assesses
control risk lowers than appropriate. Which of the following is the most likely explanation for
this situation?
A. The deviation rate in the auditor’s sample exceeds the tolerable rate, but the deviation rate
In the population is less than the tolerable rate.
B. The deviation rate in the auditors sample is less than the tolerable rate, but the deviation rate
in the population exceeds the tolerable rate.
C. The deviation rates of both the auditors sample and the popultion are less than tolerable rate.
D. The deviation rates of both the auditors sample and the population exceed the tolerable rate.
34. The risk of incorrect acceptance and the likelihood of assessing control risk too low relate to the
a. Effectiveness of an audit.
b. Efficiency of the audit.
c. Tolerable misstatement.
d. Preliminary estimates of materiality levels
35. Which of the following statements best describes 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. The documents related to the chosen sample may not be available for inspection.
C. An auditor may fail to recognize errors in the documents examined for the chosen sample.
D. An auditor may select audit procedures that are not appropriate to achieve the specific
object.

PART II.

1. Three common variations of nonstatistical sampling

1. Haphazard Sampling
2. Block Selection
3. Judgmental Sampling
2. The auditor may decide to select specific items from the population these may include
1. High value or key items
2. All items over a certain amount
3. Items to obtain information
4. Items to test procedures
3. The factors to be considered in designing an audit sample are:
1. Audit Objectives
2. Population and its characteristics
3. Risk assurance
4. Tolerable error
5. Expected error in the population
6. Stratification

4. Risk of Underreliance: the risk that although the sample result does not support the auditor’s
assessment of control risk, the actual compliance rate would support such assessment.
5. Risk of Incorrect Acceptance: the risk that, although the sample result supports the
conclusion that a recorded account balance or class of transactions is not materially
misstated, in fact it is really misstated.

6. Risk of Overreliance: the risk that although the sample result supports the auditor’s
assessment of control risk, the actual compliance rate would support such an assessment.

7. Risk of Incorrect Rejection: the risk that although the same result supports the conclusion
that a recorded account balance or class of transactions is not materially misstated, in fact it
is materially misstated.