Question 1

If a particular internal control is not followed by the client exactly 6% of the time, and the auditor's tests of that control find three control violations in a sample of 50, the sample is considered to be representative.

Accepted Answer

Since the client is not following the control exactly 6% of the time, finding three control violations in a sample of 50 indicates that the sample is representative.

Question 2

To determine if a sample is truly representative of the population, an auditor would be required to
A) conduct multiple samples of the same population.
B) never use sampling because of the expense involved.
C) audit the entire population.
D) use systematic sample selection.

Accepted Answer

To determine if a sample is truly representative of the population, an auditor would need to audit the entire population. This is called a "complete enumeration" and is often not practical due to time and cost constraints. However, it is the only way to ensure that every element in the population is included in the sample, therefore making it truly representative.

Question 3

One of the causes of nonsampling risk is
A) choosing the wrong sample size.
B) effective audit procedures.
C) inadequate sample size.
D) failure to recognize exceptions.

Accepted Answer

Nonsampling risk refers to the risk that arises from factors other than sampling and can lead to incorrect conclusions. Failure to recognize exceptions falls under this category as it can lead to auditors missing errors or irregularities in the sample or the entire population, resulting in incorrect conclusions being drawn. The other options mentioned, such as choosing the wrong sample size, inadequate sample size, and effective audit procedures, relate to sampling risk.

Question 4

One way to control sampling risk is to increase sample size.

Accepted Answer

Increasing sample size can help reduce sampling risk and increase the likelihood of obtaining a representative sample. With a larger sample size, there is a better chance of capturing the variability in the population and reducing the impact of sampling error. However, it is important to balance the benefits of a larger sample size with the costs and time involved in obtaining and analyzing the data.

Question 5

Which of the following is the risk that audit tests will not uncover existing exceptions in a sample?
A) sampling risk
B) nonsampling risk
C) audit risk
D) detection risk

Accepted Answer

Nonsampling risk refers to the risk that an auditor's procedures will not detect errors or frauds that exist because the procedures are flawed or incorrectly applied, not because of the limitations inherent in sampling.

Question 6

Assume a client's internal controls require each sales invoice to be supporting by a shipping document prepared by an outside company, but the clerk preparing sales invoices fails to follow this procedure exactly 3 percent of the time. If the auditor selects a sample of 100 sales invoices and finds two or four sales invoices are missing a shipping document, the sample is nonrepresentative of the population.

Accepted Answer

The sample size of 100 is sufficient to detect any significant deviation from the 3 percent error rate. Finding two or four sales invoices missing a shipping document in a sample of 100 does not necessarily indicate a nonrepresentative sample, as this could still fall within the expected margin of error.

Question 7

If an auditor does a test in the wrong direction, sampling risk will increase.

Accepted Answer

Sampling risk is the risk that the sample chosen is not representative of the population. Testing in the wrong direction affects the effectiveness of the audit procedure, not the sampling risk.

Question 8

Which of the following statements is most correct?
A) A sample of all items of a population will eliminate sampling risk, but increase nonsampling risk.
B) The use of an appropriate sample selection technique ensures a representative sample.
C) The auditor's failure to recognize an exception is a significant cause of sampling risk.
D) The use of inappropriate audit procedures is a significant cause of nonsampling risk.

Accepted Answer

Nonsampling risk includes the risk that the auditor's procedures are not appropriate to achieve the specific objective. Using inappropriate audit procedures directly contributes to nonsampling risk because it may lead to incorrect conclusions or the failure to detect material misstatements.

Question 9

One of the causes of nonsampling risk is
A) choosing the wrong sample size.
B) ineffective audit procedures.
C) inadequate sample size.
D) exceptions being found in the sample.

Accepted Answer

Nonsampling risk is the risk of failing to detect a material misstatement due to reasons other than sampling. One of the major reasons for this risk is ineffective audit procedures, which can lead to not uncovering material misstatements in the financial statements. Choosing the wrong sample size or inadequate sample size could also contribute to nonsampling risk but are not the only causes. Exceptions being found in the sample could lead to sampling risk, not nonsampling risk.

Question 10

A sample in which the characteristics of the sample are the same as those of the population is a(n)
A) variables sample.
B) representative sample.
C) attributes sample.
D) random sample.

Accepted Answer

A representative sample is one in which the characteristics of the sample closely match the characteristics of the population. This is important in order to ensure that the findings from the sample can be generalized to the larger population. The other answer choices do not accurately describe a sample that is representative of the population.

Question 11

An auditor can increase the likelihood that a sample is representative by using care in
A) 
B) 
C) 
D)

Accepted Answer

An auditor can increase the likelihood that a sample is representative by using care in selecting the sample and ensuring that it is random or appropriately stratified. Choice A specifically refers to selecting the sample, which is crucial for representative sampling.

Question 12

Sampling risk may be controlled by
A) 
B) 
C) 
D)

Accepted Answer

The answer of Sampling risk may be controlled by
A) 
B)...

Question 13

Which one of the choices below is most correct regarding a cause of sampling risk?
A) ineffective use of audit procedures
B) testing less than the entire population
C) use of extensive tests of controls
D) use of random sampling

Accepted Answer

Sampling risk arises from the possibility that the auditor's conclusion based on a sample may be different from the conclusion they would reach if they examined the entire population. Testing less than the entire population (option B) increases the risk of not detecting errors or fraud that could be present in the unsampled portion of the population, which is a cause of sampling risk. The other options (ineffective use of audit procedures, use of extensive tests of controls, use of random sampling) do not necessarily relate to a cause of sampling risk.

Question 14

A sample of all items in a population will have a zero sampling risk.

Accepted Answer

Sampling risk refers to the risk of making an incorrect conclusion based on the sample selected from the population. Therefore, sampling risk can be reduced to zero only by examining the entire population, which is not always feasible. Hence, if every item in a population is examined, there is no sampling risk.

Question 15

Sampling risk results from the auditor's failure to recognize exceptions in transaction data.

Accepted Answer

Sampling risk arises from the possibility that the auditor's conclusion, based on a sample, may be different from the conclusion they would reach if they examined every item in the population. It is not due to the auditor's failure to recognize exceptions but from the inherent risk that the sample may not be representative of the population.

Question 16

It is virtually impossible to reduce sampling risk to zero.

Accepted Answer

Sampling risk can never be completely eliminated because there is always a chance that the sample may not be representative of the entire population. However, the risk can be minimized by using appropriate sampling techniques and increasing the sample size.

Question 17

When the auditor decides to select less than 100 percent of the population for testing, the auditor is said to use
A) audit sampling.
B) representative sampling.
C) poor judgment.
D) estimation sampling.

Accepted Answer

Audit sampling is the process of selecting less than 100 percent of the population for testing. This sampling approach helps the auditor to obtain sufficient and appropriate evidence to support the audit opinion without examining every single item in the population. Representative sampling and estimation sampling are both types of audit sampling methods. Poor judgment is not a valid answer option.

Question 18

In practice, auditors do not know whether a sample is representative, even after all testing is complete.

Accepted Answer

This is because there is always a risk of selection bias or chance variation in the sample. Auditors can only have a reasonable level of assurance that the sample is representative, based on statistical sampling methods and professional judgment.

Question 19

A representative sample means the sampled items are similar to the items not sampled.

Accepted Answer

A representative sample is a subset of a larger population that accurately reflects the characteristics of that population. Therefore, the sampled items should be similar to the items not sampled in order to accurately represent the population.

Question 20

Which of the following is the risk that an auditor will reach an incorrect conclusion because a sample is not representative of the population?
A) sampling risk
B) nonsampling risk
C) audit risk
D) detection risk

Accepted Answer

Sampling risk is the risk that an auditor will conclude that a sample is representative of the population when it is not. The other options (B, C, D) are not specific to the issue of sampling and do not address the risk of reaching an incorrect conclusion due to inadequate sampling techniques.

Quiz 15: Audit Sampling for Tests of Controls and Substantive Tests of Transactions

If a particular internal control is not followed by the client exactly 6% of the time, and the auditor's tests of that control find three control violations in a sample of 50, the sample is considered to be representative.

To determine if a sample is truly representative of the population, an auditor would be required to

One of the causes of nonsampling risk is

One way to control sampling risk is to increase sample size.

Which of the following is the risk that audit tests will not uncover existing exceptions in a sample?

If an auditor does a test in the wrong direction, sampling risk will increase.

Which of the following statements is most correct?

One of the causes of nonsampling risk is

A sample in which the characteristics of the sample are the same as those of the population is a(n)

An auditor can increase the likelihood that a sample is representative by using care in

Sampling risk may be controlled by

Which one of the choices below is most correct regarding a cause of sampling risk?

A sample of all items in a population will have a zero sampling risk.

Sampling risk results from the auditor's failure to recognize exceptions in transaction data.

It is virtually impossible to reduce sampling risk to zero.

When the auditor decides to select less than 100 percent of the population for testing, the auditor is said to use

In practice, auditors do not know whether a sample is representative, even after all testing is complete.

A representative sample means the sampled items are similar to the items not sampled.

Which of the following is the risk that an auditor will reach an incorrect conclusion because a sample is not representative of the population?