Question 1

When working with the different variables methods,
A)difference estimation frequently results in larger sample sizes than any other method.
B)ratio estimation is the method preferred by most auditors since it is simpler to calculate confidence intervals.
C)the difference between the mean-per-unit estimate and the difference estimate is the definition of what is being measured.
D)stratification can only be used with difference estimation.

Accepted Answer

The difference method estimates the difference between the mean of the two populations being compared, while the mean-per-unit method estimates the mean value of a single population. Therefore, the difference between the two estimates is the definition of what is being measured. Option A is incorrect because the sample size required for each method depends on various factors such as the level of precision required, variability of the data, and the level of confidence desired. Option B is incorrect because ratio estimation requires more complex calculations since it involves multiplying each sampled item by a specific weight. Option D is incorrect because stratification can be used with both difference estimation and mean-per-unit estimation.

Question 2

An important statistic to consider when using a statistical sampling audit plan is the population variability.The population variability is measured by the
A)sample mean.
B)standard deviation.
C)standard error of the sample mean.
D)estimated population total minus the actual population.

Accepted Answer

Population variability is measured by the standard deviation of the population. This is important to consider when using a statistical sampling audit plan as it helps to determine the sample size needed to achieve a desired level of accuracy and confidence in the results obtained from the sample. A higher standard deviation implies greater variability within the population, and thus a larger sample size would be needed to achieve the same level of accuracy and confidence as compared to a population with lower standard deviation. Options A, C, and D are not correct as they do not measure population variability.

Question 3

Difference estimation frequently results in smaller sample sizes than any other variables sampling method.

Accepted Answer

Difference estimation allows for more efficient use of the sample data, reducing the necessary sample size. This is because it focuses on the difference between two variables, rather than estimating each variable separately, which requires a larger sample size.

Question 4

When making statistical inferences,the auditor must remember that
A)the True population value must always be known.
B)auditors can state the conclusions drawn from a confidence interval in different ways.
C)there can be no possibility that the sample is not sufficiently representative of the population.
D)the knowledge of sampling distributions does not help the auditors to draw statistical conclusions.

Accepted Answer

Auditors can interpret and present the results of statistical inferences in different ways. The true population value is unknown, and the sample may not always be fully representative of the population. However, understanding sampling distributions is crucial for drawing statistical conclusions.

Question 5

To calculate the sample size using difference estimation sampling,it is not necessary for the auditors to have an advance population standard deviation estimate.

Accepted Answer

In difference estimation sampling, auditors often need an estimate of the population standard deviation or a similar measure of variability to calculate the required sample size accurately. This estimate helps in determining the precision and reliability of the sample results.

Question 6

When using difference estimation,the precision interval is calculated by a statistical formula.

Accepted Answer

When using difference estimation, the precision interval is calculated using a statistical formula based on the sample size, variability, and level of confidence desired.

Question 7

There are four steps to generalize from the sample to the population using difference estimation sampling.Identify each of these four steps.

Accepted Answer

The answer of There are four steps to generalize from...

Question 8

When drawing statistical inferences about the population when using variables sampling,
A)a confidence interval cannot be calculated.
B)there is always a possibility that the sample is not sufficiently representative of the population to provide a sample mean or standard deviation reasonably close to those of the population.
C)the auditor does not know the reliability fo the statistical inference process that is used to draw the conclusions.
D)all of the above are correct.

Accepted Answer

When using variable sampling, there is always a possibility that the sample is not sufficiently representative of the population to provide a sample mean or standard deviation reasonably close to those of the population. Therefore, drawing statistical inferences about the population using variable sampling methods may not necessarily give an accurate result. However, a confidence interval can still be calculated in variable sampling. Option A is incorrect. Option C is also incorrect because there are established procedures for calculating the reliability of statistical inference in variable sampling.

Question 9

The confidence coefficients for ARIA are different from the confidence level.

Accepted Answer

The confidence coefficients for ARIA refer to the weights assigned to each piece of evidence, while the confidence level refers to the probability that the overall recommendation is correct. Therefore, they are different concepts that cannot be the same.

Question 10

Auditors can state the conclusions drawn from a confidence interval using statistical inference in different ways.

Accepted Answer

Auditors can use different methods to state their conclusions from a confidence interval, such as saying that they are 95% confident that the true population parameter falls within the interval, or that there is strong evidence to suggest that the population parameter is within the interval.

Question 11

Which of the following is not a type of statistical method that provides results in dollar terms?
A)variables sampling
B)attributes sampling
C)monetary unit sampling
D)sampling with probability proportional to size

Accepted Answer

Attributes sampling and variable sampling both focus on qualitative data, while monetary unit sampling and sampling with probability proportional to size both provide results in dollar terms.

Question 12

Auditors should attempt to minimize ARIA and maximize ARIR.

Accepted Answer

Auditors should attempt to minimize both Audit Risk of Incorrect Acceptance (ARIA) and Audit Risk of Incorrect Rejection (ARIR) to ensure the accuracy and reliability of the audit process.

Question 13

Acceptable risk of incorrect rejection is the statistical risk that the auditor has concluded that a population is materially misstated when it is not.

Accepted Answer

Acceptable risk of incorrect rejection, also known as Type I error or alpha risk, is the probability that the auditor may incorrectly conclude that there is a material misstatement in the financial statements and issue an adverse opinion when in fact there is no material misstatement.

Question 14

In difference estimation sampling,the confidence limits are calculated by combining the point estimate of the total misstatements and the computed precision interval at the desired confidence level.

Accepted Answer

This statement is correct. Confidence limits in difference estimation sampling are calculated by combining the point estimate of the total misstatements with the computed precision interval at the desired confidence level.

Question 15

The population standard deviation has a significant effect on the computed precision interval.

Accepted Answer

The answer of The population standard deviation has a significant...

Question 16

Explain acceptable risk of incorrect acceptance and acceptable risk of incorrect rejection within the context of variables sampling.

Accepted Answer

The answer of Explain acceptable risk of incorrect acceptance and...

Question 17

When dealing with variables sampling and sampling risk,it is important to understand that
A)for variables sampling,auditors uses ARIA but not ARIR.
B)ARIR is of serious concern to the auditor because of potential legal implications.
C)ARIA is a one-tailed statistical test.
D)the confidence coefficients for ARIA are the same as the confidence level.

Accepted Answer

The answer of When dealing with variables sampling and sampling...

Question 18

Match between columns
                        Premises: a method of variables sampling in which the auditor estimates the population misstatement by multiplying the average misstatement in the sample by the total number of population items and also calculates sampling risk
a statistical sampling method that provides misstatement bounds expressed in monetary amounts
conclusions drawn from sample results based on knowledge of sampling distributions
the risk that the auditor is willing to take of accepting a balance as correct when the True misstatement in the balance exceeds the tolerable misstatement
sampling techniques for tests of details of balances that use the statistical inference processes
the risk that the auditor is willing to take of rejecting a balance as incorrect when it is not misstated by a material amount

Accepted Answer

The Answer of stratified sampling and probability proportional to size is...

Quiz 17: Audit Sampling for Tests of Details of Balances

When working with the different variables methods,

An important statistic to consider when using a statistical sampling audit plan is the population variability.The population variability is measured by the

Difference estimation frequently results in smaller sample sizes than any other variables sampling method.

When making statistical inferences,the auditor must remember that