Question 1

Nonprobabilistic sampling methods are not based on mathematical probabilities and therefore the representativeness of the sample may be difficult to determine.

Accepted Answer

Nonprobabilistic sampling methods, such as convenience sampling or purposive sampling, do not rely on randomly selecting participants from the population and therefore it is difficult to determine how representative the sample is of the larger population.

Question 2

Describe each of the four types of sample selection methods commonly associated with statistical audit sampling.

Accepted Answer

The answer of Describe each of the four types of...

Question 3

Although systematic sample selection is easy to use,its primary disadvantage is that it is not a probabilistic sampling method.

Accepted Answer

This statement is false. Systematic sample selection is a probabilistic sampling method, meaning that each unit in the population has a known and equal chance of being selected.

Question 4

When a population is divided into subpopulations,usually by dollar size,and larger samples are taken from the subpopulation with the larger sizes,________ is being used.
A) sampling with probability proportional to size
B) stratified sampling
C) block sampling
D) haphazard sampling

Accepted Answer

The answer of When a population is divided into subpopulations,usually...

Question 5

In using audit sampling for exception rates:
A) the auditor wants to know the most the exception rate is likely to be.
B) sampling error is the likelihood that the auditor will miss a monetary misstatement.
C) the upper limit of the interval estimate is known as the sampling risk.
D) CUER cannot be considered in the context of specific audit objectives.

Accepted Answer

When using audit sampling for exception rates, the auditor wants to know the most the exception rate is likely to be. The objective is to estimate the actual exception rate in the population with a reasonable level of certainty. Sampling error refers to the risk of concluding that a sample is materially correct when it is actually materially misstated, and is not directly related to missing a monetary misstatement. The upper limit of the interval estimate is known as the precision limit or the precision interval, not the sampling risk. CUER (Computed Upper Exception Rate) is an important consideration in selecting a sample size and evaluating sample results, and is directly related to specific audit objectives.

Question 6

Simple random sampling:
A) is used when there is a need to emphasize one or more types of population items.
B) requires both input and output parameters to be set when using a random number generator.
C) is generally used with replacement sampling.
D) is a probabilistic sampling method.

Accepted Answer

Simple random sampling is a probabilistic sampling method where each member of the population has an equal chance of being selected. It does not require the emphasis of specific population items, input and output parameters, or replacement sampling.

Question 7

The most serious shortcoming of the haphazard sample selection method is:
A) it is not subject to statistical sampling methods.
B) it is time consuming to use.
C) it is costly to use.
D) it is difficult to remain completely unbiased in the selection.

Accepted Answer

The most serious shortcoming of the haphazard sample selection method is that it is difficult to remain completely unbiased in the selection process. Since the selection is done in a non-systematic way, the researcher may unconsciously choose certain individuals or groups based on personal preferences, which can skew the results and lead to inaccurate findings. Therefore, haphazard sampling should be avoided or used with caution, especially in research that requires a high level of representativeness and generalizability.

Question 8

When selecting a sample,random numbers may be obtained either with replacement or without replacement.Although both selection methods are theoretically sound,auditors rarely use replacement sampling.

Accepted Answer

Auditors rarely use replacement sampling because it increases the chance of selecting the same item multiple times, which can skew the results and undermine the validity of the sample. Therefore, auditors usually use sampling without replacement to improve the accuracy and reliability of their findings.

Question 9

The advantage of systematic sample selection is that:
A) it is easy to use.
B) there is limited possibility of it being biased.
C) it is unnecessary to determine if the population is arranged randomly.
D) it automatically selects items material to the financial statements.

Accepted Answer

The answer of The advantage of systematic sample selection is...

Question 10

You are determining the significance of the following: you set a 5% risk of assessing control risk to low and your computation of the upper deviation risk is 7%.What could you conclude?
A) There is a 95% chance the deviation rate is the population is less than 5%.
B) There is a 5% chance the deviation rate in the population is less than 7%.
C) There is a 95% chance the deviation rate in the population exceeds 95%.
D) There is a 5% chance the deviation rate in the population exceeds 7%.

Accepted Answer

Based on the given information, we set a 5% risk of assessing control risk to low. This means that we are willing to accept a 5% chance of concluding that control risk is low when it is actually high. We also computed the upper deviation risk to be 7%, which is the maximum deviation rate we would tolerate in the population. Therefore, we can conclude that there is a 5% chance that the deviation rate in the population exceeds 7%, which is the threshold we set. Choice D correctly captures this conclusion.

Question 11

What is the key advantage and disadvantage associated with systematic sample selection?
 How must auditors address this disadvantage?

Accepted Answer

The answer of What is the key advantage and disadvantage...

Question 12

Which of the following statements regarding block sampling is least likely to be true?
A) Block sampling is the selection of several items in sequence.
B) It is acceptable to use block sampling for tests of transactions only if a reasonable number of blocks is used.
C) Only one block should be selected to increase the probability of a representative sample.
D) Once the first item in the block is selected, the remainder of the block is chosen automatically.

Accepted Answer

This statement is least likely to be true because selecting only one block may not provide a representative sample, as there could be significant variation within the block. It is recommended to select multiple blocks for a more representative sample. A, B, and D are all true statements regarding block sampling.

Question 13

The highest estimated exception rate in the population at a particular acceptable risk of assessing control risk too low is:
A) the upper exception rate.
B) estimated population exception rate.
C) the computed upper exception rate.
D) the tolerable exception rate.

Accepted Answer

The computed upper exception rate is the highest estimated exception rate in the population at a particular acceptable risk of assessing control risk too low. Therefore, option C is the most appropriate answer. Option A (upper exception rate) refers to the actual rate of exceptions found in a sample and is not related to risk assessment. Option B (estimated population exception rate) may be used as a benchmark, but it does not consider an acceptable risk level. Option D (tolerable exception rate) refers to the maximum exception rate that is acceptable after considering the consequences of misstatements, and is not specific to assessing control risk.

Question 14

Which of the following methods of sample selection is appropriately used when selecting a random sample?
A) 
B) 
C) 
D)

Accepted Answer

The answer of Which of the following methods of sample...

Question 15

Which of the following occurrences would be least likely to warrant further audit attention for the auditor?
A) Deviations from client's established control procedures
B) Deviations from client's budgeted values
C) Monetary misstatements in populations of transaction data
D) Monetary misstatements in populations of account balance details

Accepted Answer

Deviations from budgeted values may be a sign of changes in the client's operations or external factors that the auditor may not be aware of. However, they may not indicate a material misstatement or control weakness. Deviations from established control procedures and monetary misstatements in populations of transaction data and account balance details are more indicative of potential material misstatements and warrant further audit attention.

Question 16

In performing a review of a client's cash disbursements,an auditor uses systematic sample selection with a random start.The primary disadvantage of this technique is population items:
A) may occur twice in the sample.
B) must be reordered in a systematic pattern before the sample can be drawn.
C) may occur in a systematic pattern, thus negating the randomness of the sample.
D) must be replaced in the population after sampling to permit valid statistical inference.

Accepted Answer

The primary disadvantage of using systematic sample selection with a random start is that population items may occur in a systematic pattern, thus negating the randomness of the sample. This can lead to a biased sample and potentially invalid conclusions drawn from the audit testing.

Question 17

Which of the following statements is correct when dealing with sampling for exception rates?
A) The term exception refers to both deviations from the client's control procedures and amounts that are not monetarily correct.
B) When used with sampling, the term deviation is synonymous with the term exception.
C) The actual population exception rate is the same as the sample exception rate.
D) In using audit sampling for exception rates, the auditor is most concerned with the confidence interval.

Accepted Answer

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

Question 18

Which of the following is most correct when using audit sampling for exception rates?
A) Auditor is concerned with the lowest rate.
B) Auditor is concerned with the highest rate.
C) Auditor is concerned with the average on previous audits.
D) This doesn't impact the auditor's decision.

Accepted Answer

When using audit sampling for exception rates, the auditor is generally most concerned with the highest rate. This is because the highest rate indicates a higher likelihood of material misstatements in the account balance or class of transactions being tested. The auditor will then need to investigate further to determine the cause of the high exception rate and whether it represents a significant risk to the financial statements as a whole.

Question 19

When the auditor goes through a population and selects items using nonprobabilistic selection methods,without regard to their size,source,or other distinguishing characteristics,it is called:
A) block sample selection.
B) haphazard selection.
C) systematic sample selection.
D) statistical selection.

Accepted Answer

The described selection method is haphazard selection, where items are chosen randomly and without any specific criteria. Option A, block sample selection, involves dividing the population into subgroups or blocks based on certain characteristics before selecting items. Option C, systematic sample selection, involves choosing items using a predetermined interval pattern, and Option D, statistical selection, is not a recognized selection method in auditing.

Question 20

Which of the following is a correct statement regarding block sampling?
A) It is acceptable to use block sampling only if a reasonable number of blocks are used.
B) Block sampling uses sampling with replacement.
C) Block sampling is a probabilistic sampling method.
D) There is considerable cost and time involved when block sampling is used.

Accepted Answer

Block sampling is a non-probability sampling method that involves dividing the population into homogenous groups or "blocks" and then selecting a sample from each block. This method is acceptable only if a reasonable number of blocks are used to ensure representativeness of the population. Option B is incorrect because block sampling uses sampling without replacement. Option C is incorrect because block sampling is a non-probability sampling method. Option D may or may not be true and depends on the specific context in which block sampling is used.

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

Nonprobabilistic sampling methods are not based on mathematical probabilities and therefore the representativeness of the sample may be difficult to determine.

Describe each of the four types of sample selection methods commonly associated with statistical audit sampling.

Although systematic sample selection is easy to use,its primary disadvantage is that it is not a probabilistic sampling method.

When a population is divided into subpopulations,usually by dollar size,and larger samples are taken from the subpopulation with the larger sizes,________ is being used.

In using audit sampling for exception rates:

Simple random sampling:

The most serious shortcoming of the haphazard sample selection method is:

When selecting a sample,random numbers may be obtained either with replacement or without replacement.Although both selection methods are theoretically sound,auditors rarely use replacement sampling.

The advantage of systematic sample selection is that:

You are determining the significance of the following: you set a 5% risk of assessing control risk to low and your computation of the upper deviation risk is 7%.What could you conclude?

What is the key advantage and disadvantage associated with systematic sample selection? How must auditors address this disadvantage?

Which of the following statements regarding block sampling is least likely to be true?

The highest estimated exception rate in the population at a particular acceptable risk of assessing control risk too low is:

Which of the following methods of sample selection is appropriately used when selecting a random sample?

Which of the following occurrences would be least likely to warrant further audit attention for the auditor?

In performing a review of a client's cash disbursements,an auditor uses systematic sample selection with a random start.The primary disadvantage of this technique is population items:

Which of the following statements is correct when dealing with sampling for exception rates?

Which of the following is most correct when using audit sampling for exception rates?

When the auditor goes through a population and selects items using nonprobabilistic selection methods,without regard to their size,source,or other distinguishing characteristics,it is called:

Which of the following is a correct statement regarding block sampling?