1. Which of the following is an example of using statistical sampling?

a. Statistical sampling will be looked upon by the courts as providing superior audit evidence.

b. Statistical sampling requires the auditor to make fewer judgmental decisions.

c. Statistical sampling aids the auditor in evaluating results.

d. Statistical sampling is more convenient to use than nonstatistical sampling.

2. Which of the following is not an example of nonsampling risk?

a. Failing to evaluate results properly.

b. Use of an audit procedure inappropriate to achieve a given audit objective.

c. Obtaining an unrepresentative sample.

d. Failure to recognize an error.

3. Which of the following is an example of nonstatistical sampling?

a. Sequential sampling.

b. Attribute sampling.

c. Haphazard sampling.

d. d. Random sampling.

4. Which of the following is not an advantage of using statistical sampling?

a. Statistical sampling aids in the design of an efficient sample.

b. Statistical sampling allows the auditor to measure the sufficiency of the evidential matter obtained.

c. Statistical sampling allows the auditor to greatly reduce substantive testing.

d. Statistical sampling provides a means for mathematically measuring the degree of risk that results from examining only part of a population.

5. Which of the following best illustrates the concept of sampling risk?

a. An auditor may select audit procedures that are not appropriate to achieve the specific objective.

b. The documents related to the chosen sample may not be available for inspection.

c. A randomly chosen sample may not be representative of the population as a whole.

d. An auditor may fail to recognize deviations in the documents examined.

6. The application of statistical sampling techniques is least related to

a. The first standard of FW.

. b. The second standard of FW.

c. The second general standard

d. d. The third standard of FW.

7. When performing tests of controls which of the following is most useful?

a. Stratified random sampling.

b. Variable sampling.

c. Unrestricted random sampling with replacement.

d. Attribute sampling.

8. An auditor examining inventory may appropriately apply sampling for attributes in order to estimate the

a. Average price of inventory items.

b. Dollar value of inventory.

c. Percentage of slow-moving inventory items.

d. Physical quantity of inventory items.

9. Respectively, attribute sampling and variables sampling are

a. Quantitative and qualitative in nature.

b. Qualitative and quantitative in nature.

c. Both qualitative and quantitative in nature.

d. None of these.

10. The risk that the assessed level of control risk based on the sample is less than the true operating effectiveness of the control structure policy or procedure is termed

a. The risk of incorrect acceptance.

b. The risk of incorrect rejection.

c. The risk of assessing too low.

d. d. The risk of assessing too high.

11. The advantage of using statistical sampling techniques is that such techniques

a. Mathematically measure risk.

b. Eliminate the need for judgmental decisions.

c. Are easier to use than other sampling techniques.

d. Have been established in the courts to be superior to nonstatistical sampling.

12. Which of the following is an element of sampling risk?

a. Choosing an audit procedure that is inconsistent with the audit objective.

b. Choosing a sample size that is too small to achieve the sampling objective.

c. Failing to detect a deviation on a document inspected by the auditor.

d. Failing to perform audit procedures that are required by the sampling plan.

13. Statistical sampling (SS) provides a technique for

a. Exactly defining materiality.

b. Greatly reducing the amount of substantive testing.

c. Eliminating judgment in testing.

d. Measuring the sufficiency of evidential matter.

14. Which of the following best describes the distinguishing feature of SS?

a. It reduces the problems associated with the auditor's judgment concerning materiality.

b. It requires the examination of a smaller number of supporting documents.

c. It is evaluated in terms of two parameters: statistical mean and random selection.

d. It provides a means for measuring mathematically the degree of uncertainty that results from examining only part of a population.

15. If certain forms are not consecutively numbered

a. Selection of a random sample probably is not possible.

b. Systematic sampling may be appropriate.

c. Stratified sampling should be used.

d. Random number tables can not be used.

16. An auditor initially planned to use unrestricted random sampling with replacement in the examination of accounts receivable. Later, the auditor decided to use unrestricted random sampling without replacement. As a result only of this decision, the sample size should

a. Increase.

b. Remain the same.

c. Decrease.

d. d. Be recalculated using a binomial distribution.

17. From prior experience, a CPA is aware of the fact that cash disbursements contain a few unusually large disbursements. In using statistical sampling, the CPA's best course of action is to

a. Eliminate any unusually large disbursements that appear in the sample.

b. Continue to draw new samples until no unusually large disbursements appear in the sample.

c. Stratify the cash disbursements population so large disbursements are reviewed separately.

d. Increase the sample size to lessen the effect of the unusually large disbursements.

18. In examining cash disbursements, an auditor plans to choose a sample using systematic selection with a random start. The primary advantage of such a systematic selection is that population items

a. Which include irregularities will not be overlooked when the auditor exercises compatible reciprocal options.

b. May occur in a systematic pattern, thus making the sample more representative.

c. May occur more than once in a sample.

d. Do not have to be prenumbered in order for the auditor to use the technique.

19. An accounts receivable aging schedule was prepared on 300 pages with each page containing the aging data for 50 accounts. The pages were numbered from 1 to 300 and the accounts listed on each were numbered from 1 to 50. Godla, an auditor, selected accounts receivable for confirmation using a table of numbers as illustrated

Procedures performed by Godla

Select column from Separate 5 digits:

table of numbers First 3 digits Last 2 digits

02011 020-11 x

85393 853-93 *

97265 972-65 *

61680 616-80 *

16656 166-56 *

42751 427-51 *

69994 699-94 *

07942 079-42 y

10231 102-31 z

53988 539-88 *

x Mailed confirmation to account 11 listed on page 20

y Mailed confirmation to account 42 listed on page 79

* Rejected

This is an example of which of the following sampling methods?

a. Acceptance sampling.

b. Systematic sampling.

c. Sequential sampling.

d. Random sampling.

20. The auditor's failure to recognize a misstatement in an amount or a deviation in an internal control, data-processing procedure is described as

a. Statistical error.

b. Sampling error.

c. Standard error.

d. Nonsampling error.

21. Which of the following statistical selection techniques is least desirable for use by an auditor?

a. Systematic selection.

b. Stratified selection.

c. Block selection.

d. Sequential selection.

22. In attribute sampling, a 10% change in which of the following factors normally will have the least effect on the size of a statistical sample?

a. Population size.

b. Tolerable deviation rate.

c. Risk of assessing too low.

d. Likely deviation rate.

23. If the auditor is concerned that a population may contain exceptions, the determination of a sample size sufficient to include at least one such exception is a characteristic of

a. Discovery sampling.

b. Variable sampling.

c. Random sampling.

d. Dollar-unit sampling.

24. An auditor plans to examine a sample of 20 checks for countersignatures as prescribed by the client's internal 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 when evaluating the sample.

c. Treat the missing check in the same manner as the majority of the other l9 checks, i.e. countersigned or not.

d. Choose another check to replace the missing check in the sample.

25. The tolerable rate of deviations for a test of controls is generally

a. Lower than the likely rate of deviations in the related accounting records.

b. Higher than the likely rate of deviations in the related accounting records.

c. Identical to the likely rate of deviations in the related accounting records.

d. Unrelated to the likely rate of deviations in the related accounting records.

26. The risk that the assessed level of control risk based on the sample is greater than the true operating effectiveness of the control structure policy or procedure is termed

a. Risk of assessing too high.

b. Risk of assessing too low.

c. Incorrect acceptance.

d. Incorrect rejection.

27. Jones, CPA, believes the industry-wide occurrence rate of client billing errors is 3% and has established a maximum acceptable occurrence rate of 5%. In the review of client invoices Jones should use

a. Discovery sampling.

b. Attribute sampling.

c. Stratified sampling.

d. Variable sampling.

28. In estimation sampling for attributes, which one of the following must be known in order to appraise the results of the auditor's sample?

a. Estimated dollar value of the population.

b. Standard deviation of the values in the population.

c. Actual occurrence rate of the attribute in the population.

d. Sample size.

29. Given random selection, the same sample size, and the same tolerable deviation rate for the testing of two unequal populations, the risk of assessing control risk too low for the smaller population is

a. Higher than the risk of assessing too low for the larger population.

b. Lower than the risk of assessing too low for the larger population.

c. The same as the risk assessing too low for the larger population.

d. Indeterminable relative to the risk assessing too low for the larger population.

30. If all other factors specified in an attribute sampling plan remain constant, changing the specified tolerable deviation rate from 6% to 10%, and changing the specified risk from 97% to 93%, would cause the required sample size to

a. Increase.

b. Remain the same.

c. Decrease.

d. Change by 4%.

31. When using statistical sampling for tests of controls, an auditor's evaluation process would include a statistical conclusion about whether

a. Procedural deviation in the population were within an acceptable range.

b. Population characteristics occur at least once in the population.

c. Monetary misstatement is in excess of a certain predetermined amount.

d. The population total is not misstated by more than a fixed amount.

32. Discovery sampling should not be used if a CPA estimates that the occurrence rate of a certain characteristic in a population being examined exceeds approximately

a. 20%

b. 10%

c. 5%

d. 0%

33. If the size of the sample to be used in a particular test of attributes has not been determined by utilizing statistical concepts, but the sample has been chosen in accordance with random selection procedures

a. No inferences can be drawn from the sample.

b. The auditor has committed a nonsampling error.

c. May not use statistical evaluation.

d. The auditor will have to evaluate the results by reference to the principles of discovery sampling.

34. In assessing sampling risk, the risk of incorrect rejection and the risk of assessing control risk too high relate to the

a. Efficiency of the audit.

b. Effectiveness of the audit.

c. Selection of the sample.

d. Audit quality control.

35. An underlying feature of random-based selection of items is that each

a. Stratum of the accounting population be given equal representation in the sample.

b. Item in the accounting population be randomly ordered.

c. Item in the accounting population should have an opportunity to be selected.

d. Item must be systematically selected using replacement.

36. In estimation sampling for variables, which of the following must be known in order to estimate the appropriate sample size required to meet the auditor's needs in a given situation?

a. The qualitative aspects of misstatements.

b. The total dollar amount of the population.

c. The acceptable level of risk.

d. The estimated rate of deviation in the population.

37. To determine the number of items to be selected in a sample for a particular substantive test of details, the auditor should consider all of the following except

a. Tolerable misstatement.

b. Deviation rate.

c. Allowable risk of incorrect acceptance.

d. Characteristics of the population.

Items 38 and 39 are based on the following information:

Sorry, I couldn't get these to fit on the page.

40. The size of a sample designed for dual purpose testing should be

a. The larger of the samples that would otherwise have been designed for the two separate purposes.

b. The smaller of the samples that would otherwise have been designed for the two separate purposes.

c. The combined total of the samples that would otherwise have been designed for the two separate purposes.

d. More than the larger of the samples that would otherwise have been designated for the two separate purposes, but less than the combined total of the samples that would otherwise have been designed for the two separate purposes.

41. The risk of incorrect acceptance and the risk of assessing control risk too low relate to the

a. Preliminary estimates of materiality levels.

b. Allowable risk of tolerable misstatement.

c. Efficiency of the audit.

d. Effectiveness of the audit.

42. When assessing the tolerable rate, the auditor should consider that, while deviations from control procedures increase the risk of material errors, such deviations do not necessarily result in errors. This explains why

a. A recorded disbursement that does not show evidence of required approval may nevertheless be a transaction that is properly authorized and recorded.

b. Deviations would result in errors in the accounting records only if the deviations and the errors occurred on different transactions.

c. Deviations from pertinent control procedures at a given rate ordinarily would be expected to result in errors at a higher rate.

d. A recorded disbursement that is properly authorized may nevertheless be a transaction that contains a material error.

43. Which of the following statistical sampling plans does not use a fixed sample size for tests of controls?

a. Dollar-unit sampling.

b. Sequential sampling.

c. PPS sampling.

d. Variables sampling.

44. Which of the following statements is correct concerning statistical sampling in tests of controls?

a. The population size has little or no effect on determining sample size except for very small populations.

b. The likely 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 likely population deviation rate decreases.

45. A number of factors influences 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. Greater reliance on internal controls.

b. Greater reliance on analytical procedures.

c. Smaller expected frequency of misstatements.

d. Smaller measure of tolerable misstatements.

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