Question 1

When the sample exception rate is greater than the tolerable exception rate in attributes sampling,one possible appropriate course of action is to increase sample size.

Accepted Answer

This is because increasing sample size can help increase the precision of the estimate and decrease the margin of error, which can help reduce the risk of accepting a low-quality lot.

Question 2

There are 14 steps to attributes sampling,divided into three sections:
 plan the sample,select the sample and perform the audit procedures,and evaluate the results.In the planning section there are 9 steps,beginning with "state the audit objective" and ending with "determine the initial sample size." Name and discuss at least 3 steps between the ones listed above.

Accepted Answer

The answer of There are 14 steps to attributes sampling,divided...

Question 3

For which of the following audit procedures would audit sampling not be appropriate?
A) Review sales transactions for large and unusual amounts.
B) Examine a sample of duplicate sales invoices for credit approval.
C) Compare the quantity on duplicate sales invoices with the quantity on related shipping documents.
D) Audit sampling is appropriate for each of the above procedures.

Accepted Answer

Audit sampling is not appropriate for reviewing sales transactions for large and unusual amounts because this procedure typically involves a targeted review of specific, significant items rather than a random or statistical sampling of many items.

Question 4

There are 14 steps to attributes sampling,divided into three sections:
 plan the sample,select the sample and perform the audit procedures,and evaluate the results.Discuss the three steps that comprise the "evaluate the results" section.

Accepted Answer

The answer of There are 14 steps to attributes sampling,divided...

Question 5

Rodgers CPA believes that the rate of client billing errors is 4% and has established a tolerable deviation rate of 6%.In auditing client invoices Rodgers should use:
A) stratified sampling.
B) classical sampling.
C) proportional sampling.
D) attributes sampling.

Accepted Answer

Attributes sampling would be the best choice for auditing client invoices because it is specifically designed to estimate the proportion of items in a population that possess a certain characteristic (in this case, billing errors) and determine if the population is within an acceptable range based on a tolerable deviation rate. Stratified, classical, and proportional sampling would not be as effective in identifying and evaluating the presence of billing errors in the invoices.

Question 6

When the SER exceeds the TER,the auditor should decide whether to increase sample size or to revise assessed control risk on the basis of cost versus benefit.

Accepted Answer

The answer of When the SER exceeds the TER,the auditor...

Question 7

A principal advantage of statistical methods of attributes sampling over nonstatistical methods is that they provide a scientific basis for establishing the:
A) risk of assessing control risk too low.
B) tolerable exception rate.
C) expected population exception rate.
D) sample size.

Accepted Answer

The answer of A principal advantage of statistical methods of...

Question 8

Attributes sampling would be an appropriate method to use on which one of the following procedures in an audit program?
A) Review sales transactions for large and unreasonable amounts.
B) Observe whether the duties of the accounts receivable clerk are separate from handling cash.
C) Examine a sample of duplicate sales invoices for credit approval by the credit manager.
D) Review the aged schedule of accounts receivable to determine if receivables from officers are included.

Accepted Answer

Attributes sampling is used for testing compliance with specific criteria, such as the approval of credit for sales invoices by the credit manager. Therefore, examining a sample of sales invoices for this purpose would be an appropriate use of attributes sampling. Options A, B, and D would require other forms of sampling, such as substantive testing or tests of controls.

Question 9

Attributes sampling is based on the ________ distribution,in which each possible sample in the population has one of two possible values,such as yes or no.
A) random
B) binomial
C) statistical
D) nonstatistical

Accepted Answer

The binomial distribution is used in attributes sampling because it assumes there are only two possible outcomes (e.g. defective or non-defective). This is appropriate for situations where the population is large and the sample size is relatively small.

Question 10

In the evaluation of the results of an attributes sample,the fact that the exception rate in the sample was 2% rather than the estimated population exception rate of 4% would cause the computed upper exception rate to:
A) be less than the tolerable exception rate.
B) equal the tolerable exception rate.
C) exceed the tolerable exception rate.
D) cannot be determined from the information given.

Accepted Answer

Since the exception rate in the sample is lower than the estimated population exception rate, it suggests that the control system is working effectively. Therefore, the computed upper exception rate will be lower than the estimated population exception rate, which means that it will be less than the tolerable exception rate.

Question 11

In attributes sampling,an estimate of the expected population exception rate is necessary to plan the sample size.The relationship of expected population exception rate (EPER)to sample size is:
A) direct (small EPER = small sample).
B) inverse (small EPER = large sample).
C) a variable (sometimes small, sometimes large) dependent on other factors present.
D) indeterminate.

Accepted Answer

The answer of In attributes sampling,an estimate of the expected...

Question 12

In nonstatistical sampling,the calculated sampling error is the difference between the tolerable exception rate and the sample exception rate.

Accepted Answer

In nonstatistical sampling, the sampling error is calculated as the difference between the actual exception rate and the tolerable exception rate.

Question 13

When audit procedures have been completed for an attributes sampling application,the auditor must generalize from the sample to the population.Which of the following statements would be incorrect regarding this process?
A) The auditor would use an attributes sampling table to determine the computed upper exception rate.
B) If the sample size is not equal to those provided for in the attributes sampling evaluation tables, the auditor cannot use attribute sampling.
C) It would be wrong for the auditor to conclude that the population exception rate is exactly the same as the sample exception rate.
D) In selecting the table corresponding to the ARO, it should be the same as the ARO used for determining the initial sample size.

Accepted Answer

If the sample size is not equal to those provided for in the attributes sampling evaluation tables, the auditor can still use attribute sampling by using estimation techniques to calculate the required sample size. Therefore, statement B is incorrect. The other statements are correct. The auditor would use an attributes sampling table to determine the computed upper exception rate, but should not conclude that the population exception rate is exactly the same as the sample exception rate. In selecting the table corresponding to the ARO, it should be the same as the ARO used for determining the initial sample size.

Question 14

Statistical sampling eliminates any professional judgment for the auditor.

Accepted Answer

While statistical sampling does involve using mathematical formulas to determine the sample size and selection, the auditor still exercises professional judgment in determining the appropriate methods and factors to consider in the sampling process, as well as in interpreting the results.

Question 15

When deciding the acceptability of the population:
A) the methodology for deciding the acceptability of the population for attributes differs from determining the acceptability for nonstatistical sampling.
B) before the population can be considered acceptable, the CUER determined on the basis of the actual sample results must be less than or equal to TER when both are based on the same ARO.
C) when the CUER is greater than the TER, the auditor must increase the sample size.
D) the CUER is compared with the TER in total, not for each attribute.

Accepted Answer

Before considering the population acceptable, the CUER (computed upper exception rate) should be less than or equal to the TER (tolerable exception rate) for the same ARO (acceptable risk of incorrect acceptance). This ensures that the risk of incorrect acceptance is within the acceptable limits. The other options are not accurate statements about determining the acceptability of a population.

Question 16

As the auditor you are assessing the proper sample size to use in testing controls.When using attributes sampling which of the following is most correct?
A) A 10% change in population size will have the least effect on sample size.
B) A 10% change in the tolerable deviation rate will have the least effect on sample size.
C) A 10% change in the expected deviation rate will have the least effect on sample size.
D) A 10% change in the tolerable will have the least effect on sample size.

Accepted Answer

The answer of As the auditor you are assessing the...

Question 17

In using sampling distribution for attributes,which one of the following must be known to evaluate the sample results?
A) Estimated dollar value of the population
B) Standard exception of the values in the population
C) Actual exception rate of the attribute in the population
D) Sample size

Accepted Answer

The answer of In using sampling distribution for attributes,which one...

Question 18

Tolerable exception rate (TER)is inversely related to sample size.

Accepted Answer

TER refers to the proportion of errors or exceptions that can be tolerated in a sample. As sample size increases, the probability of encountering errors or exceptions also increases, so a smaller TER would be required to maintain a similar level of confidence in the sample's validity. Therefore, TER is inversely related to sample size.

Question 19

Match eight of the terms (a-k)with the definitions provided below (1-8):
a.Haphazard selection
b.Attributes sampling
c.Block sample selection
d.Judgmental sampling
e.Non-probabilistic sample selection
f.Probabilistic sample selection
g.Random sample
h.Representative sample
i.Statistical sampling
j.Systematic sample selection
k.Sampling distribution
________ 1.The use of mathematical measurement techniques to calculate formal statistical results and quantify sampling risk.
________ 2.A non-probabilistic method of sample selection in which items are selected in measured sequences.
________ 3.A sample whose characteristics are the same as those of the population.
________ 4.A statistical,probabilistic method of sample evaluation that results in an estimate of the proportion of items in a population containing a characteristic of interest.
________ 5.A non-probabilistic method of sample selection in which items are chosen without regard to their size,source,or other distinguishing characteristics.
________ 6.An auditor selects items such that each population item has a known probability of being included in the sample.
________ 7.A frequency distribution of the results of all possible samples of a specified size that could be obtained from a population containing some specific parameters.
________ 8.A sample in which every possible combination of elements in the population has an equal chance of constituting the sample.

Accepted Answer

The answer of Match eight of the terms (a-k)with the...

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

When the sample exception rate is greater than the tolerable exception rate in attributes sampling,one possible appropriate course of action is to increase sample size.

For which of the following audit procedures would audit sampling not be appropriate?

There are 14 steps to attributes sampling,divided into three sections: plan the sample,select the sample and perform the audit procedures,and evaluate the results.Discuss the three steps that comprise the "evaluate the results" section.

Rodgers CPA believes that the rate of client billing errors is 4% and has established a tolerable deviation rate of 6%.In auditing client invoices Rodgers should use:

When the SER exceeds the TER,the auditor should decide whether to increase sample size or to revise assessed control risk on the basis of cost versus benefit.

A principal advantage of statistical methods of attributes sampling over nonstatistical methods is that they provide a scientific basis for establishing the:

Attributes sampling would be an appropriate method to use on which one of the following procedures in an audit program?

Attributes sampling is based on the ________ distribution,in which each possible sample in the population has one of two possible values,such as yes or no.

In the evaluation of the results of an attributes sample,the fact that the exception rate in the sample was 2% rather than the estimated population exception rate of 4% would cause the computed upper exception rate to:

In attributes sampling,an estimate of the expected population exception rate is necessary to plan the sample size.The relationship of expected population exception rate (EPER) to sample size is:

In nonstatistical sampling,the calculated sampling error is the difference between the tolerable exception rate and the sample exception rate.

When audit procedures have been completed for an attributes sampling application,the auditor must generalize from the sample to the population.Which of the following statements would be incorrect regarding this process?

Statistical sampling eliminates any professional judgment for the auditor.

When deciding the acceptability of the population:

As the auditor you are assessing the proper sample size to use in testing controls.When using attributes sampling which of the following is most correct?

In using sampling distribution for attributes,which one of the following must be known to evaluate the sample results?

Tolerable exception rate (TER)is inversely related to sample size.