Question 1

Which of the following would not result in the audit team's selecting a larger sample of controls for examination?

Accepted Answer

An increase in the tolerable rate of deviation would result in a smaller sample size since the auditor is accepting a higher level of risk. Therefore, option B is the only choice that would not result in a larger sample size.

Question 2

Lincoln,CPA,selected a sample of 100 items by dividing the population of 100,000 sales invoices by 100.With a random start,she then selected every 1,000^th invoice.This selection process is referred to as

Accepted Answer

This selection process is referred to as systematic random selection, where a starting point is randomly selected and then every nth item is selected after that.

Question 3

As a result of tests of controls,an auditor assessed control risk too low and decreased the effectiveness of her substantive procedures.This assessment occurred because the true deviation rate in the population was

Accepted Answer

The auditor assessed control risk too low because the true deviation rate in the population was more than the deviation rate in the auditor's sample, leading to an incorrect conclusion about the effectiveness of controls.

Question 4

An auditor wanted to test credit approval on 10,000 sales invoices processed during the year.The auditor designed a statistical sample that would provide a 1% risk of overreliance (99% confidence)that not more than 7% of the sales invoices lacked approval.The auditor estimated from previous experience that about 2½% of the sales invoices lacked approval.A sample of 200 invoices was examined,and 7 of them were lacking approval.The auditor then determined the upper limit rate of deviation to be 8%. The allowance for sampling risk was

Accepted Answer

The answer of An auditor wanted to test credit approval...

Question 5

An auditor is examining an important internal control in his audit of ABC Company.Because the account balance affected by this control is highly susceptible to fraud,he will reject the sample if even one deviation is discovered.What type of sampling plan should he use?

Accepted Answer

Discovery sampling is used when the auditor is looking for a very low rate of occurrence, such as fraud, and will reject the sample if even one deviation is found.

Question 6

An auditor who uses statistical sampling for attributes in testing internal controls should reduce the planned reliance on a prescribed control when the

Accepted Answer

The auditor should reduce the planned reliance on a prescribed control when the sample rate of deviation plus the allowance for sampling risk exceeds the tolerable rate of deviation. This means that the control is not operating effectively and there is a higher risk of misstatement.

Question 7

Which of the following sampling risks does the audit team control in an attributes sampling application (ROO = risk of overreliance,ROU = risk of underreliance)?

Accepted Answer

The answer of Which of the following sampling risks does...

Question 8

Which of the following steps in attributes sampling is most closely related to identifying key controls corresponding to the relevant management assertions?

Accepted Answer

Identifying key controls corresponding to relevant management assertions is directly related to determining the objective of sampling, as it involves understanding what the audit aims to achieve by testing those controls.

Question 9

A sampling plan for nonstatistical sampling is the same as statistical sampling except for which of the following steps?

Accepted Answer

Nonstatistical sampling does not use statistical methods to evaluate the sample results, whereas statistical sampling does.

Question 10

In discovery sampling,the desired probability of one occurrence is defined as

Accepted Answer

In discovery sampling, the desired probability of one occurrence is defined as 1 minus the risk of overreliance. This means that the auditor wants to ensure that the probability of missing an error or fraud is low, reducing the risk of overreliance on the controls of the system being audited. Therefore, the auditor sets a desired probability of occurrence that considers the level of risk they are willing to accept. Option B best fits this definition.

Question 11

Which of the following factors has a direct relationship with sample size in an attributes sampling application?

Accepted Answer

The answer of Which of the following factors has a...

Question 12

Which of the following is not true about using nonstatistical sampling?

Accepted Answer

Nonstatistical sampling is not always simple to use and may require auditor judgment and subjectivity in selecting items for testing. Therefore, the statement "It is simple to use" is not true. The other two statements are true.

Question 13

Why is the audit team more concerned with controlling the exposure to the risk of overreliance than with the risk of underreliance?

Accepted Answer

The risk of overreliance can lead to an incorrect audit decision, which ultimately can result in the audit team's failing to reduce audit risk to acceptable levels. This is because auditors may rely too heavily on information provided by the client, which could be inaccurate or incomplete, causing them to overlook material misstatements. On the other hand, the risk of underreliance can be controlled by performing additional tests of details or analytical procedures, and thus, it is a lower concern for the audit team.

Question 14

Which of the following major stages of the audit is most closely related to attributes sampling?

Accepted Answer

Attributes sampling is most closely related to performing tests of controls, as it is used to evaluate the operating effectiveness of controls. It involves testing a sample of transactions for the presence or absence of a specific characteristic or attribute.

Question 15

A sampling plan in which an initial sample is selected and the audit team draws a final conclusion or selects additional items before drawing a final conclusion is called

Accepted Answer

Sequential sampling involves taking an initial sample, analyzing the results, and then choosing to continue sampling or drawing a final conclusion based on the findings. This method allows for a more efficient use of resources and better decision-making as the audit progresses. Attributes sampling, discovery sampling, and statistical sampling are other types of sampling plans but do not necessarily involve a sequential approach.

Question 16

An auditor who increases the assessed level of control risk because certain control procedures were determined to be ineffective would most likely increase the

Accepted Answer

When control risk is assessed as high due to ineffective control procedures, the auditor compensates by increasing the extent of substantive procedures to gather sufficient audit evidence.

Question 17

An auditor wanted to test credit approval on 10,000 sales invoices processed during the year.The auditor designed a statistical sample that would provide a 1% risk of overreliance (99% confidence)that not more than 7% of the sales invoices lacked approval.The auditor estimated from previous experience that about 2½% of the sales invoices lacked approval.A sample of 200 invoices was examined,and 7 of them were lacking approval.The auditor then determined the upper limit rate of deviation to be 8%. In the evaluation of this sample,the auditor decided to increase the level of the preliminary assessment of control risk because the

Accepted Answer

The auditor increased the level of control risk because the tolerable rate of deviation (7%) was less than the upper limit rate of deviation (8%), indicating that the control might not be as effective as initially assessed.

Question 18

An auditor wants to perform a test of controls for a sensitive control.If she discovers even one deviation,she will reject the control as unacceptable.She is especially concerned about finding a deviation rate of more than 1 percent.Using discovery sampling and the sample evaluation table for 5 percent risk of overreliance,what sample size should she use?

Accepted Answer

The sample evaluation table for 5 percent risk of overreliance shows that if the auditor wants to achieve a maximum deviation rate of 1 percent and a minimum deviation rate of 0.5 percent with a sample size of 300, the sample should be rejected if one or more deviations are found. Therefore, a sample size of 300 would meet the auditor's requirements.

Question 19

What is an auditor's evaluation of a statistical sample for attributes when a test of 100 documents results in four deviations if the tolerable rate of deviation is 5%,the expected population deviation rate is 3%,and the allowance for sampling risk is 2%?

Accepted Answer

The auditor should calculate the upper limit rate of deviation (ULRD) using the formula ULRD = sample deviation rate + allowance for sampling risk. 
In this case, the sample deviation rate is 4%, the allowance for sampling risk is 2%, so the ULRD is 6%. 
Since the ULRD exceeds the tolerable rate of deviation of 5%, planned reliance on the control should be modified.

Question 20

Mary Todd is auditing White House furniture.In selecting a sample of purchases,she finds that a purchase order is missing.She should

Accepted Answer

If a purchase order is missing, it is considered a deviation from the expected control procedure, as it indicates a lack of documentation for the transaction.

Quiz 18: Attributes Sampling

Which of the following would not result in the audit team's selecting a larger sample of controls for examination?

Lincoln,CPA,selected a sample of 100 items by dividing the population of 100,000 sales invoices by 100.With a random start,she then selected every 1,000^th invoice.This selection process is referred to as

As a result of tests of controls,an auditor assessed control risk too low and decreased the effectiveness of her substantive procedures.This assessment occurred because the true deviation rate in the population was

An auditor is examining an important internal control in his audit of ABC Company.Because the account balance affected by this control is highly susceptible to fraud,he will reject the sample if even one deviation is discovered.What type of sampling plan should he use?

An auditor who uses statistical sampling for attributes in testing internal controls should reduce the planned reliance on a prescribed control when the

Which of the following sampling risks does the audit team control in an attributes sampling application (ROO = risk of overreliance,ROU = risk of underreliance) ?

Which of the following steps in attributes sampling is most closely related to identifying key controls corresponding to the relevant management assertions?

A sampling plan for nonstatistical sampling is the same as statistical sampling except for which of the following steps?

In discovery sampling,the desired probability of one occurrence is defined as

Which of the following factors has a direct relationship with sample size in an attributes sampling application?

Which of the following is not true about using nonstatistical sampling?

Why is the audit team more concerned with controlling the exposure to the risk of overreliance than with the risk of underreliance?

Which of the following major stages of the audit is most closely related to attributes sampling?

A sampling plan in which an initial sample is selected and the audit team draws a final conclusion or selects additional items before drawing a final conclusion is called

An auditor who increases the assessed level of control risk because certain control procedures were determined to be ineffective would most likely increase the

What is an auditor's evaluation of a statistical sample for attributes when a test of 100 documents results in four deviations if the tolerable rate of deviation is 5%,the expected population deviation rate is 3%,and the allowance for sampling risk is 2%?

Mary Todd is auditing White House furniture.In selecting a sample of purchases,she finds that a purchase order is missing.She should

Quiz 18: Attributes Sampling

Which of the following would not result in the audit team's selecting a larger sample of controls for examination?

Lincoln,CPA,selected a sample of 100 items by dividing the population of 100,000 sales invoices by 100.With a random start,she then selected every 1,000th invoice.This selection process is referred to as

As a result of tests of controls,an auditor assessed control risk too low and decreased the effectiveness of her substantive procedures.This assessment occurred because the true deviation rate in the population was

An auditor is examining an important internal control in his audit of ABC Company.Because the account balance affected by this control is highly susceptible to fraud,he will reject the sample if even one deviation is discovered.What type of sampling plan should he use?

An auditor who uses statistical sampling for attributes in testing internal controls should reduce the planned reliance on a prescribed control when the

Which of the following sampling risks does the audit team control in an attributes sampling application (ROO = risk of overreliance,ROU = risk of underreliance) ?

Which of the following steps in attributes sampling is most closely related to identifying key controls corresponding to the relevant management assertions?

A sampling plan for nonstatistical sampling is the same as statistical sampling except for which of the following steps?

In discovery sampling,the desired probability of one occurrence is defined as

Which of the following factors has a direct relationship with sample size in an attributes sampling application?

Which of the following is not true about using nonstatistical sampling?

Why is the audit team more concerned with controlling the exposure to the risk of overreliance than with the risk of underreliance?

Which of the following major stages of the audit is most closely related to attributes sampling?

A sampling plan in which an initial sample is selected and the audit team draws a final conclusion or selects additional items before drawing a final conclusion is called

An auditor who increases the assessed level of control risk because certain control procedures were determined to be ineffective would most likely increase the

What is an auditor's evaluation of a statistical sample for attributes when a test of 100 documents results in four deviations if the tolerable rate of deviation is 5%,the expected population deviation rate is 3%,and the allowance for sampling risk is 2%?

Mary Todd is auditing White House furniture.In selecting a sample of purchases,she finds that a purchase order is missing.She should

Lincoln,CPA,selected a sample of 100 items by dividing the population of 100,000 sales invoices by 100.With a random start,she then selected every 1,000^th invoice.This selection process is referred to as