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Exam 9: Audit Sampling

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Question 21

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An increase in the tolerable misstatement has what effect on the planned allowance for sampling risk?

A) Increases.
B) Decreases.
C) No effect.
D) Indeterminate.

E) B) and C)
F) A) and B)

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Question 22

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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.

E) B) and C)
F) None of the above

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Question 23

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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:

The 4,000 accounts receivable of GHI 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 $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:

Which of the following statements is correct concerning the use of nonstatistical sampling for substantive tests?

The auditors' failure to recognize a misstatement in an amount or a deviation in an internal control data processing procedure is described as a:

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?

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?

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?

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?

Increases in the planned allowance for sampling risk have what effect on required sample size?

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:

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?

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:

Use of the ratio estimation sampling technique to estimate dollar amounts is inappropriate when:

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?

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:

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

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?

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?