Question 1

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

Accepted Answer

True. The precision interval in difference estimation is calculated using a statistical formula based on the sample size, standard deviation, and level of confidence.

Question 2

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 between the mean-per-unit estimate and the difference estimate is the definition of what is being measured, which is the difference in the value of the variable of interest between two groups. This is the fundamental concept behind using the different variables methods, and is important to understand when selecting the appropriate method for a particular situation.

Question 3

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 variables sampling are both methods that can provide results in dollar terms, as they quantify the amount of errors and discrepancies in financial statements. Monetary unit sampling is specifically designed to provide results in dollar terms, as it involves selecting individual monetary units for testing. Sampling with probability proportional to size can also provide results in dollar terms, as it focuses on selecting larger transactions with higher dollar values for testing. Therefore, B is the only option that is not a method that provides results in dollar terms.

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 state the conclusions drawn from a confidence interval in different ways, and it is important to use clear and consistent language to avoid misinterpretation of the results. The other options are incorrect as the true population value may never be known, there is always a possibility that the sample may not be sufficiently representative of the population, and knowledge of sampling distributions is essential for drawing statistical conclusions.

Question 5

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 and the computed precision interval at the desired confidence level.

Question 6

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

Accepted Answer

Difference estimation allows for a more efficient use of information and variance reduction, resulting in smaller required sample sizes compared to other sampling methods.

Question 7

The confidence limits in variables sampling are similar to the_________ in monetary-unit sampling.
A)point estimate
B)misstatement bounds
C)standard deviation
D)standard error of the mean

Accepted Answer

Confidence limits in variables sampling are used to calculate misstatement bounds or tolerable misstatement, which is similar to the misstatement bounds in monetary-unit sampling. The other options are not directly related to misstatement bounds.

Question 8

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 9

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

The best measure of population variability in statistical sampling is the standard deviation. This is because the standard deviation shows how much the data is spread out from the mean of the population. It helps in determining the sample size needed for the audit and in developing a reliable estimate of the population parameter.

Question 10

The sample size is inversely related to the computed precision interval in difference estimation; that is, as sample size increases, the computed precision interval decreases.

Accepted Answer

This statement is true. As the sample size increases, the estimated standard error decreases, which leads to a smaller computed precision interval around the difference estimate.

Question 11

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 is also known as Type I error or alpha error. It is the risk that the auditor may wrongly reject a population as materially misstated when it is not.

Question 12

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 13

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 14

Match between columns
                        Premises: Sampling techniques for tests of details that use the statistical inference processes.
A statistical sampling method that provides upper and lower misstatement bounds expressed in monetary amounts.
The risk that the auditor is willing to take of concluding a balance is materially misstated when it is fairly stated.
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 is greater than tolerable misstatement.
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.

Accepted Answer

The Answer of Statistical inferences and Acceptable risk of incorrect is...

Quiz 17: Audit Sampling for Tests of Details of Balances

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

When working with the different variables methods:

Which of the following is not a type of statistical method that provides results in dollar terms?

When making statistical inferences, the auditor must remember that: