Deck 12: Managing Audit Data

Question 1

The greatest impact on audit efficiency comes from the risk(s) of:

A)overreliance and incorrect rejection.
B)underreliance and incorrect acceptance.
C)overreliance and incorrect acceptance.
D)underreliance and incorrect rejection.

Answer 1

D

Question 2

Of the following factors which would have the effect of decreasing sample size for tests of control?

A)An increase in the tolerable rate of deviation
B)An increase in the expected rate of deviation.
C)An increase in the auditor's desired level of assurance.
D)An increase in the number of sampling units.

Answer 2

A

Question 3

An auditor may use sampling to obtain information about many different characteristics of a population.However, most audit samples lead either to an estimate of:

A)a dollar rate or a deviation amount.
B)the number of items in the population or the dollar amount of the population.
C)size of the population or the distribution of the population.
D)a deviation rate or a dollar amount.

Answer 3

D

Question 4

An advantage of using stratification is:

A)it increases audit efficiency.
B)it can be used for groups with dissimilar characteristics.
C)probability of selection is the same as random sampling.
D)it is particularly effective in finding understatements.

Question 5

The steps in planning the sample are listed as follows: Which one of the following shows steps A through E in the correct order?

A)B, E, D, A and C.
B)C, A, D, E and B.
C)A, B, C, D and E.
D)C, A, B, E and D.

Question 6

Which of these would not be considered to be a source of non-sampling risk?

A)Inappropriate sample size.
B)Reliance on erroneous information.
C)Human mistakes.
D)Inappropriate audit procedures.

Question 7

Before selecting the sample for testing, it is necessary to plan what that sample will be.Which of these is not a step in planning the sample?

A)Determine the objectives of the test.
B)Consider qualitative aspects of the errors.
C)Identify the sampling unit.
D)Specify tolerable error.

Question 8

Whenever sampling is used in an audit procedure, uncertainty will be present.The two sources of this uncertainty are:

A)detection risk and control risk.
B)audit risk and detection risk.
C)inherent risk and control risk.
D)sampling risk and non-sampling risk.

Question 9

Audit sampling is involved whenever an auditor:

A)performs tests of controls.
B)examines 100% of the population.
C)performs substantive tests.
D)forms a conclusion about the population from which the sample is drawn.

Question 10

The least effective means of controlling non-sampling risk is:

A)adherence to quality control standards.
B)increasing the sample size.
C)adequate supervision.
D)proper planning.

Question 11

Sample size is determined by the application of a statistically based formula which includes all of the following except:

A)tolerable error.
B)required confidence level.
C)sampling risk.
D)all of the above are included in the formula.

Question 12

Which of the following is not a type of sampling risk?

A)Risk of overreliance.
B)Risk of incorrect decision.
C)Risk of sample size.
D)Risk of underreliance.

Question 13

The greatest impact on audit effectiveness comes from the risk(s) of:

A)underreliance and incorrect rejection.
B)overreliance and incorrect acceptance.
C)underreliance and incorrect acceptance.
D)overreliance and incorrect rejection.

Question 14

Before selecting a sample, it is necessary to specify the expected error.The main purpose for doing this is:

A)it is necessary in determining sampling risk.
B)it is necessary to compare it to the previous year.
C)it is the maximum amount that can be misstated where the auditor can still conclude that the account is fairly stated.
D)it is important in determining sample size.

Question 15

Which of these would not be considered a method of audit sampling?

A)Block selection.
B)Random selection.
C)Systematic selection.
D)Haphazard selection.

Question 16

The risk of concluding a material error does not exist when in fact it does, is also known as:

A)risk of overreliance.
B)risk of underreliance.
C)risk of incorrect acceptance.
D)risk of incorrect rejection.

Question 17

In which of these audit procedures is sampling most likely to be used?

A)Vouching.
B)Observing.
C)Enquiring.
D)Analytical procedures.

Question 18

If the sample supports the conclusion that the recorded account balance is materially misstated when it is actually not materially misstated, this is the:

A)risk of assessing control risk too low.
B)risk of assessing control risk too high.
C)risk of incorrect acceptance.
D)risk of incorrect rejection.

Question 19

The risk of concluding control risk is lower than it actually is, is also known as:

A)risk of overreliance.
B)risk of underreliance.
C)risk of incorrect acceptance.
D)risk of incorrect rejection.

Question 20

The statement that is most accurate about the terminology applied to errors identified when applying tests of controls or substantive testing to an audit sample is:

A)an error identified in substantive testing is referred to as an irregularity.
B)an error identified in substantive testing is referred to as a control deviation.
C)an error identified in a test of controls is referred to as a misstatement.
D)an error identified in a test of controls is referred to as a control deviation.

Question 21

The control which is least likely to be used as an attribute in an audit sampling plan for tests of controls is:

A)authorisation of sale by appropriate sales order department personnel.
B)approval of credit by authorised credit department personnel.
C)hiring of competent personnel only.
D)existence of a sales invoice copy.

Question 22

A situation in which variable sampling was preferable over PPS sampling would be:

A)where errors of understatement are expected or are being sought.
B)where the population includes zero and negative balances.
C)where many errors are expected.
D)all of the above.

Question 23

Briefly outline the Guiding Principles that underpin the preparation of an integrated report.

Question 24

List the nine steps in planning the sample.

Question 25

When systematic selection is used to select a sample:

A)every "nth" item is selected.
B)items are randomly selected.
C)items are stratified for selection.
D)there is no structure to selection.

Question 26

After planning the sample, selecting the sample and performing the tests it is necessary to evaluate the results.This final stage requires the auditor to consider the qualitative aspects of the errors that were found and to project errors to the population and conclude on the audit test.Explain what is involved in these two final steps of sampling.

Question 27

A method of non-statistical sampling that involves selecting items at will without regard to document number, amount, or other features is:

A)haphazard sampling.
B)block sampling.
C)systematic sampling.
D)random sampling.

Question 28

For each of the following situations, indicate whether there would be an increase, decrease, or no effect on sample size:
1 The auditor has assessed control risk as low.
2 The auditor has discovered that the number of sampling units in the population has increased from 2380 to 5640.
3 The auditor has used stratification.
4 The auditor has increased the total error that they are willing to accept.
5 The auditor has assessed the risk of material misstatement as high.
6 The auditor now expects to find more errors than originally anticipated.
7 The risk that the auditor will conclude that a material error does not exist when in fact it does has increased.

Question 29

Which of the following is NOT one of The Capitals referred to in the Integrated Reporting (IR) framework?

A)Social and relationship capital.
B)Intellectual capital.
C)Human capital.
D)None of the above.All are examples of IR Capitals.

Question 30

Which of the following is an advantage of PPS sampling over variable sampling?

A)It is more suitable for detecting errors of understatement.
B)Individually material items are automatically selected.
C)As expected error increases, sample size will be smaller than that required by variable sampling.
D)All of the above.

Question 31

Identify the three methods of selecting the sample that are suggested in ASA 530 and explain how each is conducted.

Question 32

A sample selection method that is appropriate for non-statistical sampling plans, but not statistical plans is:

A)both block and haphazard.
B)haphazard.
C)systematic.
D)block.

Question 33

An informal non-statistical sampling plan

A)uses a structured approach to determine the sample size and evaluate the sample results.
B)determines sample size and results on a quantitative basis.
C)results in qualitative conclusions about the population.
D)reduces the likelihood that the auditor will fail to recognise an unacceptable level of sampling risk.

Question 34

List the four advantages and four disadvantages of Probability-Proportional-to-Size (PPS) Sampling compared to Variable Sampling.

Question 35

An auditor is using statistical sampling for tests of controls.Which would be the most appropriate statistical sampling method to use?

A)Attribute sampling plans.
B)Variable sampling plans.
C)Probability-proportional-to-size sampling.
D)Dollar unit sampling.

Question 36

The sampling unit is:

A)the physical location of the population from which the sample will be drawn.
B)an individual item in the population.
C)the individual control procedure being tested.
D)a population expressed as an attribute of interest.

Question 37

In evaluating the sample results, the planned control risk will be supported when the projected deviation rate is:

A)greater than or equal to the expected population deviation rate.
B)greater than or equal to the tolerable deviation rate.
C)less than or equal to the expected population deviation rate.
D)less than or equal to the tolerable deviation rate.

Question 38

Define tolerable misstatement, tolerable rate of deviation and confidence level for both tests of control and substantive testing.

Question 39

Data analytics for auditors

A)is about enhancing audit quality.
B)offers a practical way for management to manage some important aspects of IT systems in larger entities.
C)provides the means to better identify financial reporting, operational business risks and fraud.
D)a and C