Question 1

When errors are found in a sample,auditors in practice generally make the assumption
A)that the population errors cannot be determined.
B)that the population errors are larger than the sample errors.
C)that the population errors are smaller than the sample errors.
D)that the actual sample errors are representative of the population errors.

Accepted Answer

Auditors in practice generally make the assumption that the actual sample errors are representative of the population errors. This assumption is based on the principle of sampling, which assumes that a small part of a population can be used to make inferences about the entire population. Therefore, if errors are found in a sample, auditors assume that a similar rate of errors exists in the population as well. However, auditors should also consider the risk of sampling errors and the need to use professional judgment when interpreting the results of the sample.

Question 2

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.Which of the following is the least likely auditor reaction to this discovery?
A)perform expanded audit tests in the relevant areas
B)increase detection risk in the relevant areas
C)increase the sample size
D)take no action until tests of other audit areas are completed

Accepted Answer

If the auditor has determined that the recorded account balance is materially misstated based on the sample results, the least likely reaction would be to increase detection risk, which would increase the risk of issuing an incorrect audit opinion. Instead, the auditor should perform expanded audit tests in the relevant areas, increase the sample size, and consider or perform additional audit procedures to obtain sufficient appropriate evidence. Taking no action until tests of other audit areas are completed could also be inappropriate, as the misstatement could have an impact on other areas of the audit.

Question 3

There are 14 steps to audit sampling for tests of details of balances,divided into three sections: plan the sample,select the sample and perform the audit procedures,and evaluate the results.Discuss each of the steps included in the "evaluate the results" section for nonstatistical sampling.

Accepted Answer

The answer of There are 14 steps to audit sampling...

Question 4

Which of the following needs to be considered when the auditor generalizes from the sample to the population?
A) 
B) 
C) 
D)

Accepted Answer

The answer of Which of the following needs to be...

Question 5

When analyzing misstatements,the auditor will determine
A)the implications of the misstatements on other audit areas.
B)the potential impact on the financial statements.
C)the effect on company operations.
D)all of the above.

Accepted Answer

When analyzing misstatements, the auditor should consider all of the above factors. They must determine how the misstatements may impact other audit areas, the potential impact on the financial statements, and the effect on company operations. This comprehensive analysis will help the auditor make informed decisions on how to address the misstatements in their audit report.

Question 6

When defining the population and the sampling unit for tests of details of balances,
A)the population is defined as all of the transactions in the journal for the period.
B)the sampling unit must be the same for all balance sheet accounts.
C)if sampling for completeness,the sampling unit will be customers with zero balances.
D)if sampling for completeness,the sampling unit will be the items making up the recorded population.

Accepted Answer

The answer of When defining the population and the sampling...

Question 7

Identify each of the seven factors that influence sample size for nonstatistical tests of details of balances,and state whether each factor is directly or inversely related to sample size.

Accepted Answer

The answer of Identify each of the seven factors that...

Question 8

If no exceptions were found in the substantive tests of transactions,
A)ARIA would stay the same.
B)the sample size would stay the same.
C)ARIA would increase.
D)the sample size would increase.

Accepted Answer

The answer of If no exceptions were found in the...

Question 9

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 not materially misstated.It was,in fact,materially misstated.This situation illustrates the risk of
A)incorrect rejection.
B)incorrect acceptance.
C)assessing control risk too low.
D)assessing control risk too high.

Accepted Answer

This situation represents a case of incorrect acceptance, where the auditor incorrectly concludes that the account balance is not materially misstated based on the sample results, but in reality, it is. This highlights the risk of not detecting material misstatements in the financial statements.

Question 10

Factors considered by an auditor to determine the possibility that the True population misstatement exceeds a tolerable amount in a nonstatistical sample include all of the following except for
A)the extent to which items in the population have been audited 100%.
B)the difference between the point estimate and acceptable control risk.
C)whether misstatements tend to be offsetting or in only one direction.
D)the amounts of individual misstatements.

Accepted Answer

The factors considered by an auditor to determine the possibility that the True population misstatement exceeds a tolerable amount in a nonstatistical sample include the extent to which items in the population have been audited 100%, whether misstatements tend to be offsetting or in only one direction, and the amounts of individual misstatements. Choice B is incorrect because it mentions the difference between the point estimate and acceptable control risk, which is a factor considered in statistical sampling, not nonstatistical sampling.

Question 11

When using nonstatistical sampling,the auditor must subjectively consider whether the True population misstatement exceeds a tolerable amount.This is done by considering five factors.One factor is the difference between the point estimate and tolerable misstatement.State the other four factors the auditor must consider.

Accepted Answer

The answer of When using nonstatistical sampling,the auditor must subjectively...

Question 12

If analytical procedures are performed with no indications of likely misstatements,ARIA will ________ and the sample size will ________.
A)remain the same;increase
B)decrease;decrease
C)increase;decrease
D)decrease;increase

Accepted Answer

The answer of If analytical procedures are performed with no...

Question 13

If the population is not considered acceptable,one step the auditor is likely to take is to
A)retest all internal controls.
B)ask the client to adjust the account balance.
C)test the entire population.
D)decrease inherent risk.

Accepted Answer

The answer of If the population is not considered acceptable,one...

Question 14

________ is a method of projecting from the sample to the population to estimate the population misstatement.It assumes that misstatements in the unaudited population are proportional to the misstatements found in the sample.
A)Mean-per-unit estimation
B)Point estimate
C)Monetary unit
D)Basic precision

Accepted Answer

The answer of ________ is a method of projecting from...

Question 15

Consider the steps in sampling for tests of details and for tests of controls.Explain the differences in applying sampling to these two types of tests.

Accepted Answer

The answer of Consider the steps in sampling for tests...

Question 16

Which of the following is an accurate statement regarding how the acceptable risk of overreliance (ARO)and the acceptable risk of incorrect acceptance (ARIA)interact to affect evidence accumulation?
A)If internal controls are likely to be effective,preliminary control risk can be increased.
B)A lower control risk requires a lower ARO in testing the controls,which requires a smaller sample size.
C)If controls are found to be effective,control risk can remain low,which permits the auditor to increase ARIA,thereby requiring a smaller sample size in the substantive tests of details of balances.
D)If misstatements are considered unlikely,ARIA will decrease,and the sample size will also decrease.

Accepted Answer

If controls are found to be effective, the control risk can remain low, which means the auditor can increase the ARIA. This allows for a smaller sample size in the substantive tests of details of balances. This is because the lower risk of misstatement means the auditor can tolerate a higher risk of incorrect acceptance, but still maintain an overall acceptable audit risk.

Question 17

Which of the following would lead to a larger sample size?
A)low inherent risk
B)low control risk
C)larger tolerable misstatement
D)unsatisfactory results in other related substantive procedures

Accepted Answer

If unsatisfactory results are found in related substantive procedures, it would increase the risk of material misstatement and imply a larger sample size is needed to provide sufficient evidence. The other options do not have a direct impact on sample size determination.

Question 18

Which of the following is a correct statement?
A)When internal controls are effective,control risk can be reduced,and therefore the auditor will decrease the ARIA.
B)There is a direct relationship between ARIA and the required sample size.
C)A lower control risk requires a lower ARO in testing the controls.
D)ARO measures the auditor's desired assurance for an account balance.

Accepted Answer

The answer of Which of the following is a correct...

Question 19

Which of the following conditions would lead to a larger sample size?
A)larger tolerable misstatement
B)low inherent risk
C)high control risk
D)smaller account balance

Accepted Answer

The answer of Which of the following conditions would lead...

Question 20

There are 14 steps to audit sampling for tests of details of balances,divided into three sections: plan the sample,select the sample and perform the audit procedures,and evaluate the results.Discuss 5 of the 9 steps included in the "plan the sample" section for nonstatistical sampling.

Accepted Answer

The answer of There are 14 steps to audit sampling...

Quiz 17: Audit Sampling for Tests of Details of Balances

When errors are found in a sample,auditors in practice generally make the assumption

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.Which of the following is the least likely auditor reaction to this discovery?

There are 14 steps to audit sampling for tests of details of balances,divided into three sections: plan the sample,select the sample and perform the audit procedures,and evaluate the results.Discuss each of the steps included in the "evaluate the results" section for nonstatistical sampling.

Which of the following needs to be considered when the auditor generalizes from the sample to the population?

When analyzing misstatements,the auditor will determine

When defining the population and the sampling unit for tests of details of balances,

Identify each of the seven factors that influence sample size for nonstatistical tests of details of balances,and state whether each factor is directly or inversely related to sample size.

If no exceptions were found in the substantive tests of transactions,

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 not materially misstated.It was,in fact,materially misstated.This situation illustrates the risk of

Factors considered by an auditor to determine the possibility that the True population misstatement exceeds a tolerable amount in a nonstatistical sample include all of the following except for

If analytical procedures are performed with no indications of likely misstatements,ARIA will and the sample size will .

If the population is not considered acceptable,one step the auditor is likely to take is to

________ is a method of projecting from the sample to the population to estimate the population misstatement.It assumes that misstatements in the unaudited population are proportional to the misstatements found in the sample.

Consider the steps in sampling for tests of details and for tests of controls.Explain the differences in applying sampling to these two types of tests.

Which of the following is an accurate statement regarding how the acceptable risk of overreliance (ARO) and the acceptable risk of incorrect acceptance (ARIA) interact to affect evidence accumulation?

Which of the following would lead to a larger sample size?

Which of the following is a correct statement?

Which of the following conditions would lead to a larger sample size?

There are 14 steps to audit sampling for tests of details of balances,divided into three sections: plan the sample,select the sample and perform the audit procedures,and evaluate the results.Discuss 5 of the 9 steps included in the "plan the sample" section for nonstatistical sampling.