Question 1

When selecting a stratified sample, the sample size is:
A)determined for the unstratified population and then apportioned to each stratum.
B)determined for each stratum and selected from that stratum.
C)determined for each stratum and selected randomly from the entire unstratified population.
D)always larger than if unstratified sampling had been used.

Accepted Answer

When selecting a stratified sample, the sample size is determined for each stratum and selected from that stratum. This ensures that each stratum is represented according to its relative size in the population, and the sample is more representative of the overall population. Therefore, option B is the correct choice.

Question 2

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 3

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

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 of audit coverage, the amounts of individual misstatements, whether misstatements tend to be offsetting or in only one direction, and the difference between the point estimate and acceptable control risk. Option B is the only statement that is not correct as it relates to statistical 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

The AICPA audit sampling formula for computing nonstatistical tests of details of balances sample size is to multiply the population recorded amount by the ________ and then divide by the ________.
A)confidence factor, ARIA
B)confidence factor, tolerable misstatement
C)ARO, tolerable misstatement
D)risk of incorrect acceptance, confidence factor

Accepted Answer

The AICPA audit sampling formula for computing nonstatistical tests of details of balances sample size is to multiply the population recorded amount by the confidence factor and then divide by the tolerable misstatement.

Question 6

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

A high control risk indicates that the internal controls are not effective, leading to a need for a larger sample size to ensure the accuracy of the audit.

Question 7

There are 14 steps to audit sampling for 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 8

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 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 illustrates the risk of incorrect acceptance, which occurs when the auditor concludes that the account balance is not materially misstated based on the sample results, but the actual balance is in fact materially misstated. The risk of incorrect acceptance can occur when the sample size is too small or the chosen items are not representative of the population.

Question 10

There are 14 steps to audit sampling for 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...

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...

Question 12

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 13

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 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 14

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 15

Discuss each of the six possible courses of action the auditor can take when he or she has concluded that the population is misstated by more than a tolerable amount.

Accepted Answer

The answer of Discuss each of the six possible courses...

Question 16

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 sample results support the conclusion that the recorded account balance is materially misstated, it is not likely that the auditor will increase detection risk in the relevant areas. The auditor's primary objective is to reduce detection risk, so it is more likely that the auditor will perform expanded audit tests in the relevant areas or increase the sample size to obtain more conclusive evidence. Taking no action until tests of other audit areas are completed is not advisable because there is a risk of overlooking significant errors or fraud.

Question 17

When errors are found in a sample, auditors in practice generally make the assumption:
A)of a 100% assumption for all errors.
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 generally make the assumption that the actual sample errors are representative of the population errors. This assumption is based on the principle of sampling, where a representative sample is selected to provide an accurate estimate of the attributes of the population being audited. Therefore, if errors are found in the sample, it is assumed that there may be similar errors or misstatements in the population. However, the auditor must exercise professional judgment and evaluate the nature and extent of the errors found in the sample to determine the impact on the financial statements as a whole.

Question 18

The client's trial balance has a balance of $410,000 for merchandise inventory.As the auditor you are willing to accept a balance that is within $20,000 of either side of the recorded balance.You compute a 95% confidence interval of $395,000 to $425,000.You could therefore:
A)reject the trial balance amount.
B)accept the trial balance amount.
C)increase the sample size to assure more precision.
D)use alternative audit procedures to satisfy yourself as to the correct balance.

Accepted Answer

The computed confidence interval of $395,000 to $425,000 includes the recorded balance of $410,000. As the auditor is willing to accept a balance within $20,000 of either side of the recorded balance, the recorded balance falls within this range. Therefore, the auditor can accept the trial balance amount. There is no need to reject the trial balance amount, increase the sample size, or use alternative audit procedures in this case.

Question 19

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,...

Question 20

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...

Quiz 17: Audit Sampling for Tests of Details of Balances

When selecting a stratified sample, the sample size is:

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

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:

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

The AICPA audit sampling formula for computing nonstatistical tests of details of balances sample size is to multiply the population recorded amount by the and then divide by the .

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

There are 14 steps to audit sampling for 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.

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.

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:

There are 14 steps to audit sampling for 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.

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

Which of the following is a correct statement?

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.

Discuss each of the six possible courses of action the auditor can take when he or she has concluded that the population is misstated by more than a tolerable amount.

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?

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

The client's trial balance has a balance of $410,000 for merchandise inventory.As the auditor you are willing to accept a balance that is within $20,000 of either side of the recorded balance.You compute a 95% confidence interval of $395,000 to $425,000.You could therefore:

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

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